Pursuing Tupperware's 4.8% Dividend

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About: Tupperware Brands Corporation (TUP)
by: Randall Radic
Summary

Tupperware is poised to continue growth in 2017 and 2018.

For 2016, Tupperware's payout for the year sits at $2.72, for a yield of 4.8%.

Tupperware looks like a good long-term dividend play.

Investors seeking long-term dividends need to look no further than Tupperware Brands (NYSE:TUP), especially if, as expected, the Fed raises interest rates. And Tupperware, according to the analysts, is poised to continue growth in 2017 and 2018.

Analysts lowered their estimates for Tupperware's 2016 fourth-quarter earnings per share from $1.39 to $1.35. The same analysts expect 2017's full-year earnings per share to hit $4.35 and 2018's full-year earnings per share to be $4.75.

The company's last earnings report occurred October 30, 2016, when Tupperware announced earnings per share of $0.87, outperforming analysts' predictions of $0.80. For the same quarter in 2015, the company's earnings per share sat at $0.79.

Tupperware lately announced a dividend payment of $0.68 per share; the payout will occur on January 6, 2017. For 2016, the payout for the year sits at $2.72, for a yield of 4.8%. Since March 2014, Tupperware has paid a quarterly dividend of $0.68. Comparing the company's present quarterly payout with its payout in 2010, which was $0.25 per quarter, shows a dividend increase of 170% over the last six years.

If indeed, the Fed does initiate a rate hike, this could bode well for Tupperware's share price, which may mean a dividend increase would take place. The thinking behind the previous sentence goes like this: in December 2013, Tupperware's per share price was $95.72, which was just prior to the Fed easing back rates. Once the Fed lowered rates, Tupperware's share price dropped 30%, to the $65 mark. Some analysts say this was because consumer staples were overvalued then and still are.

Even though my rationale appears to be counter-intuitive, there is a difference. The difference is that most consumer staples are trading at 20x to 25x earnings. Tupperware's present price to earnings ratio is 13, meaning it is undervalued. In other words, Tupperware is trading below its long-term value, while paying out a 4.8% dividend.

To support my rationale, I reviewed what Matthew Carr had to say about the worst-performing sectors prior to a rate hike by the Fed, along with sector performances after rate hikes. According to Carr, consumer staples are one of the worst prior to rate hikes, and struggle a bit for six months after the rate hikes. But twelve months after the rate hikes, consumer staples improve, as do all the sectors, with Information Technology and Energy in starring roles.

Since Tupperware's share price currently sits at the $56 mark, the advent of a stronger economy, one in which the Fed raises rates, should boost Tupperware's share price. According to analysts, current price targets for Tupperware in 2017 range from a low of $47 to a high of $64.

Toss in the fact that consumer staples outperformed most of the market in recent days, and it appears that traders are once again bullish on this sector. And this is prior to any announced rate hike.

Tupperware looks like a good long-term dividend play. Investors should look for steady growth in 2017, with regular payouts. Expect share price to hit the $66 mark in 2017. And late in 2017 or early in 2018, Tupperware will probably announce a payout increase.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.