The 7 Best Stocks For Growth During Difficult Times Ahead

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 |  Includes: BCR, BF.B, GWW, SHW, SIAL, TROW, VFC
by: Avi Morris

The 2 ways to increase wealth are capital gains and dividends. Studies generally show that 2/3 of gains comes from capital appreciation and the balance from dividends. But capital appreciation in recent years has been limited with a high degree of volatility. Nasdaq started 2000 at 4069 and the Dow Jones Industrials was 10,573. Since then, Nasdaq has fallen 29% while Dow is up a modest 20%.

Capital appreciation has been disappointing and that trend may continue. Currently Europe has an enormous debt mess to clean up while it works its way out of recession. China has been a major factor in stimulating world growth, but its growth has slowed for 6 quarters. The US economy has had a mediocre recovery following one of the worst recessions in the last century and that recovery is sputtering. The U.S. is facing uneven consumer confidence along with the potential for higher taxes (federal, state and local) in January.

I have always been a big fan of dividends. Stocks with dividend yields of 3% provided roughly a 40% gain since 2000 (with reinvested dividends and assuming a flat stock price). Dividend Aristocrats, companies that have raised their annual dividends for a minimum of the last 25 years, might seem to be an unusual place for capital appreciation ideas, but a few have excellent records stock growth while they were raising annual dividends. Below are 7 Dividend Aristocrats with stock prices have at least tripled in the last 10 years:

Company

Price

Yield

P/E ratio

T Rowe Price (TROW)

$61.85

2.2%

18.8X

VF Corp. (VFC)

$139.87

2.1%

14.7X

WW Grainger (GWW)

$188.09

1.7%

17.7X

Brown-Forman (BF.B)

$95.92

1.5%

24.5X

Sherwin-Williams (SHW)

$127.23

1.2%

20.3X

Sigma-Aldrich (NASDAQ:SIAL)

$71.61

1.1%

17.9X

CR Bard (BCR)

$107.71

0.7%

16.1X

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(1) T Rowe Price is a global investment management organization with $490 billion under management. It manages mutual funds, subadvisory services and separate accounts for individual and institutional investors, retirement plans, and financial intermediaries and provides fundamental research.

(2) VFC Corp is a $9 billion apparel and footwear any with diverse, international brands. Popular brands include The North Face, Nautica, Timberland, Lee and Wrangler.

(3) WW Grainger is North America's leading supplier of maintenance, repair and operating products and is expanding global operations (including India and Japan).

(4) Brown-Forman is known for quality alcohol beverages, including Jack Daniel's, Southern Comfort, Finlandia, Canadian Mist and Gentleman Jack sold in 135 countries. Over the last 35 years, EPS grew at a compounded 13% annual growth rate.

(5) Sherwin-Williams is a global leader in paint coatings under brands such as Sherwin-Williams, Dutch Boy, Krylon, Minwax and Thompson's sold through 3400 company-operated stores and dealers.

(6) Sigma-Aldrich makes biochemical, organic chemical products used in scientific research, including research, biotechnology, pharmaceutical development for the diagnosis of disease.

(7) CR Bard is a leading multinational developer and marketer of innovative, life-enhancing medical technologies in vascular, urology, oncology and surgical specialty products.

These companies have delivered outstanding profitability for stockholders when so many companies did not. A triple over 10 years is equivalent to an 11½% compounded annual growth rate (the 1-2% yield is extra). That's what successful investing is all about! SHW, GWW and BF.B stocks are at record levels (the others are near record levels) and substantially above their highs in 2008. P/E ratios are moderate. BF.B and SHW have the highest P/E ratios, but their stocks quadrupled in the last 10 years. Past performance does not guarantee future performance. But when looking for appreciation, these companies are much more encouraging than so many others with mediocre stock records (not to mention companies with declining stocks prices).

Disclosure: I am long VFC.