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In this article we will analyze three consumer stocks that offer high dividend yields as well as earnings growth. Due to low yields in the fixed income market, investors are favoring stocks that offer high dividend yields. In this aspect, the growth of the company is key as this can lead to sustainability of dividends as well as dividend growth.

Altria (NYSE:MO) is one of the leading cigarette manufacturing companies in the U.S., with annual revenues of over $17 billion. The company holds almost 50% of the U.S. cigarette market share. More than three quarter of the total revenue is contributed by its cigarettes division. The company has a strong growth rate for the next five years of 6.5% per annum. In the recent second quarter, the company was able to increase its earnings by more than 9%. The company also offers an attractive dividend yield of 5.4%; annualized dividend of $1.76 per share. This makes it a great stock for dividend seeking investors. Altria has a strong dividend history and a free cash flow yield of 7.3%, which indicates that the company will be able to sustain its dividends in future. The stock offers a good mixture of growth and dividend yield to investors. We recommend buying the stock.

Altria has been working on improving upon its cost structure. Under the cost reduction program, the company is expected to save $400 million annually. In the more recent quarters, the company has been able to maintain decent margins. The chart below shows margins of the company in the last three quarters.


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The company is scheduled to announce its third quarter earnings this week. It is expected to have an EPS of $0.58, up 4% YOY, and revenues of $4.36 billion in 3Q 2012.

Procter & Gamble (NYSE:PG)

Procter & Gamble is one of the largest multinationals of the world, with product markets in more than 180 countries. It has annual revenue of almost $84 billion. Emerging markets were the main driver of the company's growth in the recent past, and these markets are expected to have a significant positive impact on P&G's top and bottom lines. Thirty eight percent of the total revenue of the company is earned from emerging markets. In the future, the company is expected to target 10 developing markets in order to grow. The company is expected to have a strong growth rate of 8.5% per annum for the next five years. We are bullish on the stock.

Along with strong future growth, the company offers a decent dividend yield of 3.3%. It has been sharing its success with shareholders through a share repurchase program, and through dividend payments. It has an operating cash flow yield of 7% and a free cash flow yield of 4%, indicating that the company will be able to sustain its dividends, as it has done in the past.

Despite the volatile input prices, the company has maintained its gross margins and has improved upon its profit margins. The chart below shows margins for the last four quarters.


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The company is expected to further improve its financial performance because of Bill Ackman, who acquired a 1% stake in the company, pushing the management to improve upon its operations and margins. The company has a strong business model, and we expect P&G to be able to deliver improved performance going forward.

Mondelez International (NASDAQ:MDLZ):

Mondelez international has a strong brand portfolio. Most of the brands of the company are market leaders, or close seconds, in their respective industries. Furthermore, the company is perfectly placed to take advantage from growing developing markets around the world. It has diversified its geographical revenue base, with almost 44% of its revenues earned from developing markets. To take full advantage of growing middle classes in developing markets, the company is venturing into new markets and coming up with new products.
It is expected to have a strong top line growth of 5%-7% , and a bottom line growth rate in the low to mid-double digit range. It has a dividend yield of 2%; a dividend of $0.52 - $0.55 per share. A strong expected growth rate and decent dividend yield makes the company an attractive investment. Therefore, we recommend buying its stock.

Source: 3 Consumer Stocks To Buy For Robust Growth And Strong Dividend Yields