We try to stay calm, cool and collected as others around us lose their composure. One “port in the storm” of high market volatility, poor national and international economic outlooks and low interest rates would be solid dividend paying consumer staple stocks -specifically food stocks. In the current market environment the defensive posture of the consumer staples sector is golden. Equally important, each of the five blue chip companies profiled below offer the unique combination of above market rates of current income (with the prospect of continued dividend growth) combined with safety of dividend, future growth and long-term price appreciation.
Campbell Soup Company (CPB) 3.90% Yield
Campbell Soup is a $10 billion market cap company that manufactures and markets branded food products worldwide that traces its lineage back to 1869. Revenue last year was almost $8 billion. This shareholder friendly company has an active share repurchase plan and has been increasing the dividend annually in recent years, eg. $.88 - 2008, $1.00-2009 and $1.075 – 2010. Currently the dividend is $.29 per quarter, which annualizes to $1.16 per year. The dividend is comfortably covered by earnings with a payout ratio of 47%. With a stock price of $30.85 and a dividend of $1.16 Campbell Soup provides a yield of 3.90%.
ConAgra Foods, Inc. (CAG) 4.00%
ConAgra Foods is a $10 billion market cap company founded in 1919, that provides branded, private label and customized food products. Revenue for ConAgra was over $12 billion last year and the company generated more than $1.3 billion in cash flow. In addition to raising the dividend 15% last year, ConAgra returned an additional $825 million to shareholders through share repurchases. The dividend is comfortably covered by earnings with a payout ratio of 47%. Earnings are currently slated to increase from $1.82 this fiscal year to $1.99 next year. With a stock price of $23.92 and a dividend of $0.92, ConAgra provides a yield of 4.00%.
General Mills, Inc. (GIS) 3.40%
General Mills is a $23 billion market cap company founded in 1928, that manufactures and markets branded consumer foods on a worldwide basis. Revenue for the latest fiscal year was $15 billion. Operating profits have grown at 7% per year since 2007. Dividends were increased 17% last year and a further 9% this June. Additionally, share count was reduced by almost 3% last year through a shareholder friendly repurchase program. The payout ratio is just 41%. Current estimates have earnings per share rising from $2.61 this year to $2.83 next fiscal year. With a stock price of $36.75 and a dividend of $1.22 General Mills provides a current yield of 3.40%.
H. J. Heinz Co. (HNZ) 3.70%
H.J. Heinz is a $16.5 billion market cap company founded in 1869, that is based in Pittsburgh, Pennsylvania. Heinz manufactures and markets food products for consumers, foodservice and institutional customers worldwide. Revenue for last year was almost $11 billion. Cash provided by operations was a record $1.58 billion last year. On May 26, 2011, Heinz raised the quarterly dividend a further 6.7% to an annualized $1.92 per share. The payout ratio is 57%. Earnings are currently estimated to increase from $3.34 this year to $3.64 next year. With a share price of $51.44 and a dividend of $1.92 Heinz provides a yield of 3.70%.
Kellogg Company (K) 3.30%
Kellogg is a $19 billion market cap company that manufactures and markets ready to eat cereal and convenience foods. Based in Battle Creek, Michigan, the company was founded in 1906. Kellogg had revenue of $12.4 billion last year. In 2010 Kellogg purchased slightly more than $1 billion in common stock and increased the dividend by 9.7%. The dividend is comfortably covered by earnings with a payout ratio of 48%. Earnings are slated to increase from $3.49 this fiscal year to $3.80 next year. With a stock price of $53.20 and a dividend of $1.72 Kellogg provides a yield of 3.30%.
All five of the consumer staple companies above provide investors with impressive current yields through dividends that are both sustainable and growing while at the same time providing the opportunity for capital appreciation.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.