We reviewed the investment universe for low volatility, large-cap stocks. Investment Underground found seven safe havens for your money in retirement. Those which passed the test are:
3M Company (MMM) has a market cap of $64 billion. Over the past five years, the share price is up 22%. Moreover, its board of directors recently upped its dividend to $0.55 for Q1 2011. This is a current yield of 2.4%, and MMM has paid dividends since 1916. Shares also trade under a P/E multiple of 16, coming from an EPS of $5.63. For 2011, 3M expects EPS to be in the range of $5.90 to $6.10 or increases in the range of 4.79% to 8.3%.
In 2010, the company brought in $26.6 billion in revenues, which is a year-on-year increase of 15.3%. It also has a healthy EBT margin of 21.59%. In comparison, GE (GE) and Tyco (TYC) posted EBT margins of 8.8% and 9.1%, respectively. Also, the return on invested capital is an efficient 20.5%. On the other hand, GE and Tyco produced ROICs of 1.6% and 8.26%, respectively. The D/E is a manageable 0.3.
In recent quarters, 3M made acquisitions of Winterthur Technologies, Cogent, Attenti Holdings and Arizant. This grows its opportunities in abrasives, security product and the health care market. Given past history, the company will continue to make strategic acquisitions.
Abbott Labs (ABT) pays a dividend yield of 4%, and has paid dividends since 1926. The next dividend payment is on May 16 for investors of record on April 15. Over the last five years, ABT is up 8.4%. Also, its market cap stands at over $73 billion. Shares trade with a P/E of 16 with an EPS of $2.96, which is a fall of 19.78% from 2009. Abbott issued ongoing earnings-per-share guidance for 2011 of $4.54 to $4.64, which is a EPS growth range of 50.3% to 56.7%.
In 2010, the company grew revenues by 14.3%. Its EBT margin is 16.25%, whereas for Pfizer (PFE) and Novartis (NVS) it is 12.87% and 22.7%, respectively. The company’s ROIC is 11.48%, but 7.77% and 12.43% for Pfizer and Novartis. D/E of 0.56.
In 2010, Abbott Labs acquired Solvay Pharmaceuticals and Piramal Healthcare Solutions. Founded in 1888 by Chicago physician Dr. Wallace C. Abbott, Abbott has emerged as one of the world's most diverse health care companies. Abbott is ranked as the most admired company in the pharmaceutical industry in 2010 by FORTUNE magazine and is # 75 on the FORTUNE 500 list. The company has nearly 90,000 employees worldwide serving customers in more than 130 countries and is headquartered in north suburban Chicago. (Read more about smart dividend picks like Abbott, here.)
Campbell Soup (CPB) has a current yield of 3.4%, and has paid dividends since 1902. Shares are also up 7.8%, over a five-year period. Currently, the market cap is over $11 billion. Over the trailing 12 months, ending on January 31, 2011, the EPS is $2.34. This implies a P/E of 14.3. Campbell revised its full-year fiscal 2011 guidance and now expects net sales to be between 1% and -1%, adjusted EBIT to decline between 3% and 5% and EPS to decline between 1% and 3% from the fiscal 2010 adjusted base of $2.47.
Net sales came in at $7.6 billion with an EBT margin of 15.3%, from January 2010 to January 2011. In comparison, Sara Lee (SLE) and Heinz (HNZ) had EBT margins of 5% and 12.6%, respectively. As of October 2010, ROIC was 20.38%, but for its peers above, the ROICs were 17.95% and 13.35% (for the most recent 12 months of operations). Campbell’s D/E is 3.5.
On February 18, Douglas R. Conant, Campbell's president and CEO, said, “The overall competitive environment remains challenging throughout the food industry, particularly in the U.S. In U.S. soup, as planned in the second quarter, we maintained strong levels of advertising and promotional support to defend our consumer base. As a result of this support, externally measured consumer takeaway volume at retail in U.S. soup grew during the quarter. However, our high levels of promotional spending in the quarter did not deliver planned sales lifts and negatively impacted margins. As we stated at the end of the first quarter, in the second half we will more heavily leverage advertising and brand building initiatives while reducing our reliance on trade promotions. We expect that improved price realization will lead to better profitability and strengthen our financial position in anticipation of higher cost inflation going forward.
“Baking and snacking, our second largest segment, delivered top and bottom line growth in the quarter. This performance reflected our consistent innovation, compelling advertising and effective promotional activities.” (Read more about smart consumer stocks here.)
Coca-Cola Company (KO) has paid dividends since 1893. Right now, the yield is 2.9%. Recorded investors on March 15 will get their next dividend payment on April 1. Over the last five years, share prices are up over 50%. They currently trade at a P/E of 12.7.
For 2010, reported net revenue was $35.1 billion. Over the past five years, EBT margins have consistently been in the upper 20s, whereas for Dr. Pepper Snapple (DPS), it has been between 14% and 15%. The ROIC for Dr. Pepper Snapple was 9.5% in 2010, but for Coca-Cola it was right near 20%.
In 2010, the company returned $7.2 billion to shareowners in 2010, through $4.1 billion in dividends and $3.1 billion in share repurchases. In 2011, it expects to repurchase $2 billion to $2.5 billion in stock over the course of the year as part of a share repurchase program. The company expects its acquisition with Coca Cola Enterprises to have 2011 cost synergies of $140 to $150 million.
PepsiCo (PEP) also competes with Coca-Cola. The company brought in $57.8 billion in revenues with an EBT margin of 14.2% and ROIC of 17.86% in 2010. Over the last five years, share price is up 6.8%. Currently, shares trade with a P/E of 16.2, and PEP’s market cap is over $100 billion. The next dividend payment date is March 31 to investors on record at March 4. The current yield is 3%. The company’s D/E is 0.94.
PEP’s Q1 2011 EPS growth will likely be negative. The company had a very low core tax rate in Q1 2010, when the rate was below 23%. Also, it will have higher interest expense when in two months in 2010 there was no debt associated with the bottler acquisitions, and the related bottler profits for that period will not offset the higher interest because the first two months are seasonally very low from a profit performance perspective. So, PEP will likely have a mid single-digit decline in core EPS in Q1, but that has been completely factored into the company’s full-year 2011 7% to 8% EPS guidance. (Read about other blue chips that can withstand inflation here.)
Fastenal (FAST) shares are up 41.8% over the last five years. On Friday, February 25, the company paid $0.50 per share in dividends. It typically pays dividends twice per year, and more recently, it also pays a special dividend. The company paid the most dividends per share in 2010 with $1.24. This was a yield of 2% in 2010. Shares trade at a P/E of 34.1, and FAST has a market cap of over $9 billion.
In 2010, company revenues were $2.26 billion with an EBT margin of 18.98% and ROIC of 21.46%. Looking at one competitor, over the last 12 months, WW Grainger (GWW) made $6.98 billion in revenues with an EBT margin of 11.55% and ROIC of 17.59%. However, Fastenal has no debt on its balance sheet, and WW Grainger has a D/E of 0.21.
In January, two new executive officers joined the company. Michael Scott Camp became the new executive VP of product and procurement. He originally joined Fastenal in 1991. During his tenure with Fastenal, he served in various roles centered on the company supply chain. From 2003 to 2007, Mr. Camp was the president of the company’s FASTCO subsidiary based in Shanghai, China. Since 2007, he has served as the VP of product development/procurement in Winona, Minnesota. Ashok Singh is the new executive VP of IT. He originally joined Fastenal in 2001. During his tenure with Fastenal, he has served in various roles of increasing responsibility in the administration and application development areas within the information technology group in Winona, Minnesota.
Fastenal sells different types of industrial and construction supplies in the following product categories: threaded fasteners and miscellaneous supplies; tools; metal cutting tool blades and abrasives; fluid transfer components and accessories for hydraulic and pneumatic power; material handling; storage and packaging products; janitorial, chemical and paint products; electrical supplies; welding supplies; safety supplies; and metals, alloys and materials.
The company operates approximately 2,500 stores located primarily in North America with additional locations in Asia, Europe and Central America. The company operates 11 distribution centers in the United States - Minnesota, Indiana, Ohio, Pennsylvania, Texas, Georgia, Washington, California, Utah, North Carolina and Kansas, and three outside the United States - Ontario, Canada, Alberta, Canada, and Nuevo Leon, Mexico. (Read about more mid-cap bellwethers here.)
Medtronic (MDT) shares are down 26.2% over the last five years, but are up 7.5%, year-to-date. MDT has a market cap of over $42 billion, and has a current yield of 2.2%. The next payment is in April for investors of record on April 8. Medtronic has paid dividends since 1977.
With an EPS at $3, MDT trades at a P/E of 13.2. For the fiscal year ending in April 2011, the company expected earnings in the range of $3.38 to $3.40 a share. This implies an EPS growth of 21.1% to 21.8% from $2.79 in FY 2009.
For the 12 months ending in January 2011, the company made revenues of $15.8 billion with an EBT margin of 25.5% and ROIC of 12.7%. Comparable companies include Baxter (BAX) and Covidien (COV), which recorded EBT margins of 14.7% and 18.3%, respectively, and ROIC of 12.7% and 12.27%, respectively.
On Friday, February 25, the company announced that it completed the purchase of rights to a chitosan-dextran gel technology from Adelaide Research & Innovation in Australia, Robinson Squidgel, and Otago Innovation in New Zealand. Medtronic is acquiring this technology for potential use in developing future products for functional endoscopic sinus surgery (FESS).
More than 525,000 FESS procedures are performed annually in the U.S. The most common complications are bleeding and adhesions, which are scars that can form at the surgical site as sinus tissues heal after FESS. These adhesions can block the sinuses, potentially causing disease to recur and requiring additional surgery. (Read more about Buffett-esque healthcare picks here.)