Retirement investing is a little different than the total return investing you may have been doing all your life. You used to swing for the fence knowing that time, volatility and regular capital additions to your portfolio would prove the principles of long-term dollar-cost averaging. During retirement and distribution phase of your life, dollar-cost averaging works against you and becomes your worst enemy.
Your new goals are:
- Capital preservation
- A conservative total return that exceeds your withdrawal rate, taxes and inflation
- A return that beats the market
The stocks you'd like to hold are those that:
- Are expected to have a higher-than-average revenue growth rate
- Are expected to have a higher-than-average earnings growth rate
- Are paying a higher-than-average dividend yield
Today I screened for those attributes and came up with B&G Foods (NYSE:BGS). Over the next 3 to 5 years, revenue is expected to compound at an annual rate of 13.00%, earnings are expected to compound at an annual rate of 10.50%, and the stock presently pays a 3.87% dividend.
First I make sure the stock is outperforming the market. Why would I want to add a stock to my portfolio unless it significantly does better than the market? I use the Value Line Arithmetic Index as my Market benchmark for 2 reasons: 1) it contains 1,700 stocks with a total capitalization of almost 95% of the U.S. stock market, and 2) it is not weighted by capitalization, so the big stocks have the same weighting as the small ones. During the last year, while the market was down 13.92%, BGS gained 16.96%.
In fact, Value Line disclosed that during the last 5-year period, the average stock had a total return of 52.1%, while BGS had a total return of 221.5%.
During the last 2 1/2 months, BGS has also out performed the Value Line Index by about 10%.
I like to research the stock's underlying fundamentals on other sites to see if that price momentum is warranted.
- Market Cap $2.08 billion
- P/E 24.15
- Dividend yield 3.87%
- Wall Street analysts expect revenue to grow 9.60% this year and another 55.50% next year
- They also estimate earnings will increase 9.00% this year, an additional 33.80% next year and compound at an annual rate of 11.88% for at least the next 5 years
- Financial Strength B+
The overall sentiment of the investing community is very important. A stock will not maintain its upward momentum if some of the major players are starting to bail.
- Wall Street analysts have issued strong buy, buy and hold recommendations on the stock to their clients
- Institutional investors own about 79.58% of the outstanding shares. During the last year about 271 institutions owned this stock. 143 added to their positions while 87 lowered their positions. 51 institutions opened new positions while 20 sold out completely. Net the institutions added to their positions by 2,39, 261 shares
- Insiders increased their ownership with 13 buys and 11 sells for an increase of 56,135,000 shares
- On TheStreet, Jim Cramer's staff gave the stock an A- rating
- The individual investors who follow Motley Fool voted 297 to 18 that the stock will beat the market
- Short sellers increase their short positions over the past year from about 3.42 million shares to 4.75 million shares more recently
I like to use Barchart for technical momentum data and only consider date from the current 6-month period:
- 24% technical buy signals
- Trend Spotter buy signal
- Above its 20 and 50 day moving averages
- 3 new highs and up 2.31% in the last month
- Relative Strength Index 55.25%
- Technical support level at 35.13
- Recently traded at 35.86 with a 50 day moving average of 35.40
I like to compare my stock to the 3 largest stocks in the same sector: Prepared foods. B&G Foods gained 16.72%, Mondelez International (NASDAQ:MDLZ) gained 6.63%, Conagra Food (NYSE:CAG) gained 12.45% and Campbell Soup (NYSE:CPB) gained 19.27%:
- Market Cap $61.61 billion
- P/E 24.14
- Dividend yield 1.59%
- Revenue expected to decline 17.10% this year and another 1.60% next year
- Earnings estimated to increase 1.10% this year, an additional 11.80% next year and continue to compound at an annual rate of 8.38% for the next 5 years
- Wall Street analysts issued 4 strong buy, 11 buy, 7 hold and 1 under perform recommendation to their clients
- Financial Strength A
- Market Cap $17.70 billion
- P/E 19.00
- Dividend yield 2.38%
- Revenue expected to decline 25.50% this year but grow again by 1.40% next year
- Earnings estimated to increase 5.00% this year, an additional 5.52% next year and continue to compound at an annual rate of 6.72% for the next 5 years
- Wall Street analysts issued 1 strong buy, 4 buy and 7 hold recommendations to their clients
- Financial Strength A-
- Market Cap $17.44 billion
- P/E 21.38
- Dividend yield 2.19%
- Revenue expected to decline .70% this year but grow again by 1.70% next year
- Earnings estimated to increase 14.60% this year, an additional 5.00% next year and continue to compound at an annual rate of 4.86% for the next 5 years
- Financial strength B++
SUMMARY: In my opinion, B&G Foods is clearly the winner in the prepared foods sector. Although it is slightly weaker in Financial strength than the others with a B+ rating, it clearly has more optimistic projections by Wall Street analysts in revenue and earnings growth than the larger choices in the same sector. Investors adding to their portfolios at this time should expect to get an annual total return exceeding 10% for the next few years.
Below I have included a chart of the price against the 20-, 50- and 100-day moving averages plus a 14-day high/low turtle chart, which shows recent upward price momentum.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in BGS over the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I think additional tags of Long, Retirement, Income and Dividend might all be appropriate