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In this article, I will run you through my quick analysis for 2 consumer dividend stocks that I believe are trading at attractive prices but with solid financial performance and brand recognition to support capital appreciation. Although further research is warranted, I believe this article will serve as a helpful introduction for identifying some undervalued investment opportunities.

Tupperware Brands Corp. (NYSE:TUP) - Market cap of ~$2.9B and dividend yield of ~2.8%

Introduction - TUP engages in designing, manufacturing, and distributing kitchen, home, beauty, and personal care products. The firm employs a direct sale model and has a global network of ~2.3M sales representatives. TUP markets its kitchen and home products under Tupperware brand, and beauty and personal care products under brands such as Avroy Shlain, BeautiControl, Fuller, and Nuvo etc. Geographically, TUP generates ~28.9% of total revenues from North America, ~10.6% from South America, ~27.6% from Asia Pacific, and ~32.8% from Europe. It is this significant exposure to Europe that helped drive down the stock price to ~$51, slight above its 52-week low of ~$49. Recent downbeat sentiment towards other direct sellers such as Herbal Life (NYSE:HLF) and Avon Products (NYSE:AVP) also fueled the negative price action. However, I believe the market reaction is overdone as I am confident in the management's ability to continue drive modest growth in the European markets given that TUP has demonstrated success in Germany and France and the firm's robust profitability and liquidity position will likely help in weathering the softness in Europe.

Growth - TUP's top line has grown at a 4-year CAGR of ~6.9% over the past 5 fiscal years. Analysts expect revenues to increase ~1.9% and ~6.2% in the current and next fiscal years. The slower growth estimates reflect the European softness. EPS has experienced a much higher growth at a 4-year CAGR of ~17.4% primarily owing to stock buyback and effective cost controls. It is expected to grow at ~41.4% and ~11.6% in the current and next fiscal years.

Profitability - Over the past 3 fiscal years, TUP has generated stable 3-year average EBIT margin, net margin, and ROE of ~13.5%, ~8.8%, and ~32.3%, respectively. In addition, TUP has TTM EBIT margin, net margin, and ROE of ~15.0%, ~8.5%, and ~32.3%, respectively. These outperform the firm's major competitor - Newell Rubbermaid Inc. (NYSE:NWL)'s ~12.5%, ~2.2%, and ~7.0%.

Liquidity Position - TUP has ~$691M long-term debt and capital lease obligation. It is sitting on ~$106M cash, amounting to ~$1.9 per share. In the past 3 years, TUP has produced a stable FCF margin of ~9.3% in average, outperforming NWL's figure of ~7.0%. The company has a long history of paying dividends. Over the past 5 years, the ratio of dividend payment over FCF is ~36.1% in average. With the firm's solid growth prospect and historically stable FCF margin, I expect not only the dividend payment can be sustained but also the extra FCF can continue to support the share buyback that has already in place for a long time.

Valuation - The stock price now is at $51. At this level, it is trading at ~9.2x the estimated next fiscal year EPS and ~8.0x the LTM EBITDA. Such valuation is compelling as NWL, with inferior growth prospect, profitability, and FCF generating ability, is trading at ~9.7x the estimated next fiscal year EPS and ~8.0x the LTM EBITDA - very much in line with TUP's valuation. Thus, I believe a valuation premium to NWL's price multiples should be warranted. Applying a 10% premium on NWL's earnings multiple, I arrived at a target stock price of ~$60, indicating a ~17.6% upside potential.

Analyst Ratings - According to Thomson One, of the 9 analyst ratings, there are 2 strong buys, 3 buys, and 4 holds. The mean target price for TUP is $74.5, representing a ~44.4% upside potential.

Tiffany & Co. (NYSE:TIF) - Market Cap of ~$6.9B and dividend yield of ~2.4%

Introduction - TIF engages in designing, manufacturing, and distributing luxury jewelry and accessories. Retail stores are the firm's primary distribution channel with more than 240 stores in the US and other international markets. TIF generates ~49.6% of total revenues from Americas, ~16.9% from Japan, ~20.5% from other Asia Pacific regions, and ~11.6% from Europe. The firm's shares have declined ~18% and ~26% on YTD and one-year basis, and are currently trading at very close to its 52-week low of ~$53. The plunge is primarily driven by its revenue exposure to Europe, where consumer spending is severely impacted by austerity and economic uncertainty, and the firm's recent lackluster quarterly earnings release. However, I believe the price action is overblown as TIF's prestige brand and overall healthy financial position will likely sustain its customer royalty and allow the firm to remain on track with its expansion plan in the emerging markets such as Brazil and China, where luxury spending is booming with rising middle-class group.

Growth - Top line has increased at a 5-year CAGR of ~6.6% over the past 6 fiscal years compared to its global peer average of ~10.7%. EPS has grown at a 4-year CAGR of ~9.1% over the past 5 fiscal years compared to the global peer average of ~6.5%. In the current and next fiscal years, analysts expect revenues to grow at ~7.1% and ~9.2% and EPS to increase at ~9.4% and ~15.2%.

Profitability - TIF's 5-year average EBIT margin, net margin, and ROE are ~17.2%, ~10.4%, and ~16.8%, respectively. They are slightly lower than the global peer averages of ~22.9%, ~14.9%, and ~20.8%.

Liquidity Position - TIF has total debt obligations of ~$834M and is currently sitting on ~$343M cash, amounting to ~$2.7 per share. The firm is able to average a FCF margin of ~6.6% (vs. the global peer average of ~12.6%) over the past 5 fiscal years; however, it produced a negative FCF of ~$29M in 2011 due to the substantial increase in capital expenditure as the firm invests in new stores in emerging markets. Even with the mediocre FCF generating ability, the firm still manages to grow its dividend payments at a 4-year CAGR of ~19.6% over the past 5 fiscal years. But investor should be cautious about potential dividend cut as TIF continues to spend on oversea expansion in the future.

Valuation - At the current price of ~$54, the stock is trading at ~15.9x the LTM EPS and ~8.3x the LTM EBITDA. Compared to the global peer averages of ~19.5x the LTM EPS and ~11.0x the LTM EBITDA, the valuation discounts are substantially at ~18.5% and ~24.5% to the earnings and EBITDA multiples, respectively. Given TIF's established brand equity, strong presence in emerging markets, and solid financial performance, I believe the discount should be no more than 10%. Applying the 10% discount on both the group average multiples and equally weighting the 2 methods, I arrived at a fair stock value of ~$72, indicating a ~32.5% upside.

Analyst Ratings - According to Thomson One, of the 23 analyst ratings, there are 4 strong buys, 6 buys, the rest are holds. The mean target price for TUP is ~$69, representing a ~27.7% upside potential.

Financial data is sourced from company 10-Q, 10-K, press release, Yahoo Finance, YCharts, Wall Street Journal, Thomson One and Morningstar.

Source: 2 Consumer Dividend Plays With Strong Brand Recognition And Solid Financial Performance