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Mondelez International: Slow And Steady Wins The Race

Mondelez International Inc (MDLZ) reported Q4 and fiscal 2019 earnings and the stock price surged to ~$60 per share. But this past week’s downturn has brought the valuation back down to earth. It is currently trading at an earnings multiple of roughly 19.8. Granted, this is no bargain, but it is still below the average valuation in the past decade and it is also below the average earnings multiple of the S&P 500. Furthermore, the yield is back up to ~2.2%, which is currently better than the S&P 500 average yield of ~2.0%. I like Mondelez because it is the global leader in biscuits, chocolate, candy and No. 2 in gum. These are all growth categories. Mondelez revenue and earnings grows slow and steady and in turn this permits the company to raise the dividend slow and steady. Mondelez is a Dividend Challenger. The company also has comparatively low payout ratio, low debt, and the stock is not too volatile. These are all attractive characteristics. For these reasons, I view Mondelez as a long-term buy.

Mondelez Slow and Steady Growth and Profitability

Through various strategic moves Mondelez has emerged as the market leader in snacking with No. 1 market share in biscuits, chocolate, and candy; and No. 2 market share in gum. In 2019, Mondelez had revenue of $25.89B. Revenue is divided into biscuits (43% of sales) chocolate (32% of sales), gum and candy (13% of sales), cheese & grocery (7% of sales), and beverages (5% of sales). The four leading categories are in general growing faster than the rest of the consumer staples market and are expected to grow at 4% annually. Mondelez has global exposure with 75% of sales from outside the US. In fact, 38% of sales are from Europe, 26% from North America, 23% from Asia, Middle East & Africa, and 13% from Latin America…

Disclosure: I am long MDLZ.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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