The world economy is entering a period of heightened uncertainty. Budgetary cuts in Europe and the region's sovereign debt crisis, tensions associated with a possible Greek exit from Eurozone, and early indications of a slowdown in China have increased the likelihood of a marked deceleration in the global economy. Investors have greeted these developments with panic, which is causing large sell-offs in the global markets.
However, the demand for products of some companies is not susceptible to such cyclical changes in economic conditions. For example, people have to eat whether the economy is expanding or contracting. Therefore, demand for food staples, considered consumer non-cyclical products, fares well regardless of the developments in the overall economic activity. Most of the food companies trade with lower volatility relative to the broad market. Many of the non-cyclical consumer companies pay regular dividends, which generates income during uncertain economic times. Here are six such non-cyclical consumer goods companies paying dividends with a dividend yield of at least 3% (see chart below).
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ConAgra Foods (CAG) is a $10.4 billion food company producing popular brands such as Banquet, Chef Boyardee, and Healthy Choice. The company has $11.4 billion in assets, including almost 4 billion in cash. ConAgra Foods has a dividend yield of 3.8% and a payout ratio of 50%. The company's EPS grew at an average annual rate of 16.4% over the past five years, is forecast to grow EPS at a much slower rate of 6.6% a year over the next five years. Mario Gabelli and Ray Dalio bought small stakes in the company in the first quarter of 2012.
H.J. Heinz Company (HNZ) is a $17.3 billion global food producer, famous for its Heinz ketchup, Bagel Bites, and T.G.I. Fridays brands. The company has $12.2 billion in assets, including $3.7 billion in cash. The company pays a dividend yield of 3.5% with a payout ratio of 63%. H.J. Heinz Company grew its EPS at an 18.8% average annual rate over the past five years. It is expected to grow EPS at a modest 7.3% rate over the next five years. Famous investor Ken Fisher is upbeat about the company, while investors Ray Dalio and Joel Greenblatt sold out their stakes in the company last year.
Kellogg Company (K) is an $18 billion cereal and convenience food producer, the maker of popular brands such as cereals Corn Flakes, Frosted Mini Wheats, and Nutri Grain Cereal Bars. The company has $11.9 billion in assets, including $3 billion in cash. It pays a dividend yield of 3.4% with a 50% dividend payout ratio. The company expanded its EPS by an average 6.2% a year over the past five years. It is forecast to grow its EPS by an average annual rate of 7.7% over the next five years. The company is popular with guru investor Mario Gabelli.
Campbell Soup Company (CPB) is an $11 billion soup maker. The company produces popular soups in Condensed, Chunky, Select Harvest, Healthy Request, and other brands. It has $6.9 billion in assets, including nearly $2 billion in cash. The company pays a dividend yield of 3.4% with a payout ratio of 47%. Campbell Soup grew its EPS by an average rate of 6.8% a year over the past five years, and is expected to increase EPS by an average of 4.1% over the next five years. Fund managers Ray Dalio and Joel Greenblatt purchased small stakes in the company in the first quarter of 2012.
Kraft (KFT) is a $68 billion producer of packaged food products, including biscuits, cheese, coffee products, chocolates and convenience meals. The company's popular brands include Jacobs, Milka, Maxwell House, and Nabisco. The food maker has almost $94 billion in assets, including almost $2 billion in cash. The company pays a dividend yield of 3% on a payout ratio of 58%. It grew its EPS, on average, by 3% a year over the past five years. The food maker is expected to grow earnings at a more robust 9% annual average rate over the next five years. Activist investor Bill Ackman is bullish about the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
