14 Dividend Yielding Consumer Goods Stocks

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Includes: CAG, CPB, GIS, IP, K, KHC, KMB, LO, MDLZ, MO, PEP, PG, PM, RAI
by: Insider Monkey

Our past studies have shown that dividend stocks outperformed the market by an average of 1.36% per year between 1928 and 2009. We like high dividend yielding stocks because they usually deliver decent returns by paying fat dividends and they usually increase their dividend payments over the succeeding 5 to 10 years.

We do not like the Fed's expansionary monetary policy. We think the economy is more resilient than the Fed expects and the Fed will probably be late to respond to strong economic growth by raising rates. This carries the potential to significantly elevate inflation and hurt fixed-income investors. Therefore, we believe high dividend stocks will be able to provide better returns than long-term treasury bonds and protect investors from potential inflation.

Below we compiled a list of 14 dividend yielding U.S. consumer goods stocks. All companies have a market cap of over $10 billion and a dividend yield of at least 3%. The market data is sourced from Finviz.

Ticker

Company

Dividend Yield

52-week Return

CAG

ConAgra Foods, Inc.

3.6%

19.4%

CPB

Campbell Soup Co.

3.7%

-6.7%

GIS

General Mills, Inc.

3.0%

13.8%

HNZ

H. J. Heinz Company

3.7%

9.3%

IP

International Paper Co.

3.4%

15.6%

K

Kellogg Company

3.5%

0.5%

KFT

Kraft Foods Inc.

3.0%

26.0%

KMB

Kimberly-Clark Corporation

3.9%

17.8%

LO

Lorillard, Inc.

4.8%

58.9%

MO

Altria Group Inc.

5.8%

22.7%

PEP

Pepsico, Inc.

3.1%

3.2%

PG

Procter & Gamble Co.

3.3%

0.1%

PM

Philip Morris International, Inc.

4.1%

35.4%

RAI

Reynolds American Inc.

5.7%

30.7%

On average, these 14 stocks returned 17.62% over the past 52 weeks, versus 3.96% for the S&P 500 index in the same period. Only four of them - CPB, K, PEP and PG - underperformed the market in the past 52 weeks, while nine of them - CAG, GIS, IP, KFT, KMB, LO, MO, PM and RAI - heavily beat the market by generating double-digit returns.

Among these stocks, Lorillard is the best performing stock. It returned a stunning 58.94% over the past 52 weeks, outperforming the market by 55 percentage points. Lorillard is a manufacturer of cigarettes in the United States. It has a market cap of $15B, a dividend yield of 4.8%, and a P/E ratio of 14.5. As of September 30, 2011, there were 23 hedge funds with LO positions. Jim Simons is the most bullish hedge fund manager about LO. His Renaissance Technologies had $300-plus million invested in this position at the end of the third quarter.

Altria Group also generated double-digit returns during the past 52 weeks. It was up 22.74% in that period, beating the market by 19 percentage points. Altria Group also manufactures and sells cigarettes, smokeless products and wine. The company reported net income of $1.2 billion for the third quarter of 2011, compared with $1.1 billion for the same quarter of 2010. MO also has the highest dividend yield among the 14 stocks listed above. The $58 billion market cap stock has a dividend yield of 5.8% and a P/E ratio of 17.3. At the end of September, 28 hedge funds disclosed owning MO in their 13F portfolios. For instance, Tom Russo's Gardner Russo & Gardner had $190 million invested in MO at the end of the third quarter.

One mega-cap dividend consumer stock is Philip Morris International Inc . It has a dividend yield of 4.1% and returned 35.38% over the past 52 weeks, outperforming the market by more than 30 percentage points. PM has a market cap of $130B and a P/E ratio of 15.9. Philip Morris is also a manufacturer of cigarettes and other tobacco products. It reported net income of $2.4 billion for the third quarter of 2011, up from $1.8 billion for the same quarter a year ago. PM is quite popular among hedge funds. At the end of the third quarter last year, there were 38 hedge funds with PM positions in their 13F portfolios. Tom Russo and Jim Simons are also bullish about PM. Russo's fund had $500-plus million invested in PM and Simons' fund invested nearly $400 million in the stock. Additionally, Bill Miller loves PM. His Legg Mason Capital Management reported to own about $150 million worth of PM shares at the end of September.

We are concerned about the Fed's inflationary policies and we recommend investors to play defensively. We think high dividend stocks are good options for defensive investors and they can provide attractive risk-return combinations as well as some inflation protection. We strongly encourage investors to do some careful research about these dividend stocks for their own portfolios.

Disclosure: I am long PM.