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The amount of debt determines a company's return on equity (ROE). The higher the leverage ratio is, the better the return on the shareholder’s equity. Most people think that there is a contradiction between low debt and high returns, especially in industries with high capital efforts. Sometimes though, that it is not true. Let’s take a look at the consumer goods sector.

I screened stocks from the consumer goods sector with a debt to equity ratio of less than one as well as a return on equity of more than 20 percent. That’s a pretty high restriction for stocks with a high equity based business.

In addition to the mentioned criteria, the dividend yield must be over 3 percent in order to get a base return. 13 stocks remained of which 5 are small caps (stocks with a market capitalization of less than $300 million). Such stocks have often a higher risk. That’s the reason why I only prefer stocks with a market capitalization of more than $2 billion.

Here are the results:

1. Unilever (NYSE:UL) is located within the major diversified foods industry. The company has a market capitalization of $93.4 billion, generates revenues in an amount of $60.4 billion and a net income of $5.9 billion. It follows P/E ratio is 15.9 and forward price to earnings ratio 13.2, Price/Sales 1.6 and Price/Book ratio 4.5. Dividend Yield: 3.8 percent. The debt to equity ratio amounts to 0.72 and the return on equity is 32.1 percent.

2. Reynolds American (NYSE:RAI) is located within the cigarettes industry. The company has a market capitalization of $22.8 billion, generates revenues in an amount of $8.6 billion and a net income of $1.4 billion. It follows P/E ratio is 17.0 and forward price to earnings ratio 13.8, Price/Sales 2.7 and Price/Book ratio 3.4. Dividend Yield: 5.4 percent. The debt to equity ratio amounts to 0.55 and the return on equity is 20.6 percent.

3. Mattel (NASDAQ:MAT) is located within the toys and games industry. The company has a market capitalization of $9.5 billion, generates revenues in an amount of $6.1 billion and a net income of $697.2 million. It follows P/E ratio is 14.4 and forward price to earnings ratio 11.7, Price/Sales 1.6 and Price/Book ratio 3.9. Dividend Yield: 3.3 percent. The debt to equity ratio amounts to 0.39 and the return on equity is 28.0 percent.

4. Autoliv (NYSE:ALV) is located within the auto parts industry. The company has a market capitalization of $5.0 billion, generates revenues in an amount of $7.8 billion and a net income of $644.1 million. It follows P/E ratio is 8.2 and forward price to earnings ratio 8.0, Price/Sales 0.6 and Price/Book ratio 1.5. Dividend Yield: 3.2 percent. The debt to equity ratio amounts to 0.21 and the return on equity is 22.0 percent.

5. Hasbro (NASDAQ:HAS) is located within the toys and games industry. The company has a market capitalization of $4.6 billion, generates revenues in an amount of $4.2 billion and a net income of $370.4 million. It follows P/E ratio is 13.1 and forward price to earnings ratio 9.9, Price/Sales 1.1 and Price/Book ratio 3.2. Dividend Yield: 3.5 percent. The debt to equity ratio amounts to 0.96 and the return on equity is 24.2 percent.

6. Packaging Corp. of America (NYSE:PKG) is located within the packaging and containers industry. The company has a market capitalization of $2.6 billion, generates revenues in an amount of $2.6 billion and a net income of $255.0 million. It follows P/E ratio is 11.5 and forward price to earnings ratio 11.3, Price/Sales 1.0 and Price/Book ratio 2.5. Dividend Yield: 3.2 percent. The debt to equity ratio amounts to 0.67 and the return on equity is 23.2 percent.

Source: 6 Low Debt Consumer Goods Stocks With High ROE And Solid Dividends