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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 (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 (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 (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 (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 (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 (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