Consumer staples companies, such as Mondelez International, are favorites of many dividend growth and income investors. This is due to the long-term ability to raise the dividend and the relatively decent yields. These companies in general exhibit stable earnings and cash flows over long periods of time. Some are also Dividend Kings, Dividend Aristocrats, or Dividend Champions adding to their attraction. Furthermore, consumer staples companies are probably insulated from trade wars. Most generate the majority of their revenue from the U.S. or North America. I am long some of these stocks and they form a core part of my dividend growth portfolio. In this article, I compare 17 consumer staple stocks and then analyze them with my weighted ranking model. The highest ranked stock is Hormel Foods Corporation (HRL), which is no surprise. But I currently view this stock as a hold due to relative overvaluation. The second highest ranked of the consumer staples companies is Mondelez International Inc (MDLZ), which I view as a long-term buy.
In these analyses I use nine criteria that permit rapid quantitative screening based on the dividend, earnings growth, dividend growth, dividend safety, and valuation. The nine criteria used in quantitative screening are:
- History of increasing dividends
- Dividend yield
- 5 Years EPS growth rate
- 5 years dividend growth rate
- 10 years dividend growth rate
- Payout ratio
- Long-term debt-to-equity ratio (D/E)
- 5-year Beta
- P/E Ratio for trailing twelve months
The goal here is to identify stocks for further research not make buy or sell decisions. There are often qualitative factors for each stock that must be researched before making an investment decision. For instance, I also evaluate P/E ratio relative to past 5-years or 10-years and dividend-to-FCF ratio. Other qualitative factors can also include management history, recent M&A activity, and effect of tariffs and trade wars on revenue…
Disclosure: I am long MDLZ.
Please read the complete article at my profile on Seeking Alpha. To read about consumer staples companies and Mondelez.
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