Things have, kind of, stabilized since the first part of the article was written about a month ago. Although the fundamentals in the U.S. and Europe still look weak, markets have gotten used to the news, and daily swings, although common, are no where as volatile as we saw in the month of August. However this euphoria might well be short-lived and dangerous gyrations in markets might well be back and be with us for a long period of time, till the time the fundamental issues are resolved in the developed world.
In the first part of my “Sleep Well” portfolio, I had decided to outline five stocks that should help investors accumulate wealth over time, in times difficult or rosy. Those are iconic American brands that have stood the test of time, wars, recessions, inflation and oil scares. Not only do they provide capital appreciation over time, these companies are also serious dividend payers with track records of constantly increasing dividends over time. These companies are certainly not the darlings of a lot of investors, neither are they glamorous in any regards. These are boring stocks, stocks that seems too “cold” for a lot of people, yet these companies represent significant opportunity of accumulating wealth in the long run. These companies are also an excellent and “safe” way of playing the international/Emerging Markets story because a significant proportion of sales for all five companies comes from international markets.
In this, the second part of the series, I have decided to outline another five companies, as iconic as the first five, with significant international exposure and long history of dividend increases.
1. McDonald’s (MCD, Financial):
McDonald’s is the largest fast food chain in the world operating more than 32,000 restaurants worldwide in 117 countries. It serves burgers and fries to more than 64 million customers per day, and is aggressively expanding in key emerging markets like China & India. Key figures for McDonald’s include:
· 10 Years Sales Growth Rate = 5.5%
· 10 Years Earnings Per Share (EPS) Growth Rate = 13.8%
· Price /Earnings Ratio ( As of 08/09/2011) = 17.90
· Price/ Book Value ( As of 08/09/2011) = 6.1
· Dividend Yield = 2.75%
· Consistent Increase in Dividend Payment for 34 Years
· 10 Years Dividend Growth Rate = 25%
· Dividend Payout Ratio = 49%
· International Sales = 66% of Total Sales.
2. PepsiCo (PEP, Financial):
PepsiCo is a global snacks and beverage powerhouse holding the No. 1 position in savory snacks and No. 2 position in beverages in more than 200 countries. Fifty-one percent of 2010 sales came from beverages, and the rest from the snacks segment. It holds 19 billion-dollar brands and is aggressively expanding its “good for you/healthy snacks” portfolio. Key figures for PepsiCo include:
· 10 Years Sales Growth Rate = 8%
· 10 Years Earnings Per Share (EPS) Growth Rate = 10%
· Price /Earnings Ratio ( As of 08/09/2011) = 15.60
· Price/ Book Value ( As of 08/09/2011) = 4.0
· Dividend Yield = 3.36%
· Consistent Increase in Dividend Payment for 39 Years
· 10 Years Dividend Growth Rate = 12.5%
· Dividend Payout Ratio = 52%
· International Sales = 47% of Total Sales.
3. Kimberly-Clark (KMB, Financial):
Kimberly-Clark is a global personal hygiene company that aims to “make products essential for better life.” Its products, mainly paper based, are sold in more than 150 countries where it holds No. 1 or No. 2 market share, aggressively pushing operations and sales in key emerging markets like Russia, China and Latin America. Key figures for Kimberly-Clark include:
· 10 Years Sales Growth Rate = 3%
· 10 Years Earnings Per Share (EPS) Growth Rate = 4%
· Price /Earnings Ratio ( As of 08/09/2011) = 16.10
· Price/ Book Value ( As of 08/09/2011) = 4.8
· Dividend Yield = 4.11%
· Consistent Increase in Dividend Payment for 39 Years
· 10 Years Dividend Growth Rate = 9%
· Dividend Payout Ratio = 56%
· International Sales = 48% of Total Sales.
4. Intel (INTC, Financial):
Intel is the world’s largest computer chip maker with a virtual monopoly (>80% market share) in this segment. It is aggressively pushing its “ATOM” line of processors to gain a foothold in the tablets market and riding on the strong sales of PCs in emerging markets and the rise of cloud computing. Key figures for Intel include:
· 10 Years Sales Growth Rate = 5%
· 10 Years Earnings Per Share (EPS) Growth Rate = 26%
· Price /Earnings Ratio ( As of 08/09/2011) = 9.10
· Price/ Book Value ( As of 08/09/2011) = 2.1
· Dividend Yield = 4.22%
· Consistent Increase in Dividend Payment for 8 Years
· 8 Years Dividend Growth Rate = 23%
· Dividend Payout Ratio = 30%
· International Sales = 85% of Total Sales.
5. 3M (MMM, Financial):
3M is a diversified scientific conglomerate which has a portfolio of more than 55,000 products and operates in more than 65 countries. Strong products foothold includes industrial and transport, healthcare, display and graphics, and consumer products. Key figures for 3M include:
· 10 Years Sales Growth Rate = 5%
· 10 Years Earnings Per Share (EPS) Growth Rate = 12%
· Price /Earnings Ratio ( As of 08/09/2011) = 13.50
· Price/ Book Value ( As of 08/09/2011) = 3.2
· Dividend Yield = 2.78%
· Consistent Increase in Dividend Payment for 53 Years
· 10 Years Dividend Growth Rate = 6%
· Dividend Payout Ratio = 36%
· International Sales = 65% of Total Sales.
As mentioned earlier, these 10 iconic American companies as outlined in this two-part article makes for a sound investment in times “thick & thin” that allows investors to sleep well every night if made a core part of their portfolios. A portfolio consisting of these 10 stocks, brought at right price, provides enough diversification and concentration to promote maximum total return. Extreme fear, as was evident in the stock market recently, has hammered the prices of some of these stocks to very attractive valuations, which if held for a long run will reward investors handsomely as well as let them sleep well when the whole world around them keeps falling over and over.
In the first part of my “Sleep Well” portfolio, I had decided to outline five stocks that should help investors accumulate wealth over time, in times difficult or rosy. Those are iconic American brands that have stood the test of time, wars, recessions, inflation and oil scares. Not only do they provide capital appreciation over time, these companies are also serious dividend payers with track records of constantly increasing dividends over time. These companies are certainly not the darlings of a lot of investors, neither are they glamorous in any regards. These are boring stocks, stocks that seems too “cold” for a lot of people, yet these companies represent significant opportunity of accumulating wealth in the long run. These companies are also an excellent and “safe” way of playing the international/Emerging Markets story because a significant proportion of sales for all five companies comes from international markets.
In this, the second part of the series, I have decided to outline another five companies, as iconic as the first five, with significant international exposure and long history of dividend increases.
1. McDonald’s (MCD, Financial):
McDonald’s is the largest fast food chain in the world operating more than 32,000 restaurants worldwide in 117 countries. It serves burgers and fries to more than 64 million customers per day, and is aggressively expanding in key emerging markets like China & India. Key figures for McDonald’s include:
· 10 Years Sales Growth Rate = 5.5%
· 10 Years Earnings Per Share (EPS) Growth Rate = 13.8%
· Price /Earnings Ratio ( As of 08/09/2011) = 17.90
· Price/ Book Value ( As of 08/09/2011) = 6.1
· Dividend Yield = 2.75%
· Consistent Increase in Dividend Payment for 34 Years
· 10 Years Dividend Growth Rate = 25%
· Dividend Payout Ratio = 49%
· International Sales = 66% of Total Sales.
2. PepsiCo (PEP, Financial):
PepsiCo is a global snacks and beverage powerhouse holding the No. 1 position in savory snacks and No. 2 position in beverages in more than 200 countries. Fifty-one percent of 2010 sales came from beverages, and the rest from the snacks segment. It holds 19 billion-dollar brands and is aggressively expanding its “good for you/healthy snacks” portfolio. Key figures for PepsiCo include:
· 10 Years Sales Growth Rate = 8%
· 10 Years Earnings Per Share (EPS) Growth Rate = 10%
· Price /Earnings Ratio ( As of 08/09/2011) = 15.60
· Price/ Book Value ( As of 08/09/2011) = 4.0
· Dividend Yield = 3.36%
· Consistent Increase in Dividend Payment for 39 Years
· 10 Years Dividend Growth Rate = 12.5%
· Dividend Payout Ratio = 52%
· International Sales = 47% of Total Sales.
3. Kimberly-Clark (KMB, Financial):
Kimberly-Clark is a global personal hygiene company that aims to “make products essential for better life.” Its products, mainly paper based, are sold in more than 150 countries where it holds No. 1 or No. 2 market share, aggressively pushing operations and sales in key emerging markets like Russia, China and Latin America. Key figures for Kimberly-Clark include:
· 10 Years Sales Growth Rate = 3%
· 10 Years Earnings Per Share (EPS) Growth Rate = 4%
· Price /Earnings Ratio ( As of 08/09/2011) = 16.10
· Price/ Book Value ( As of 08/09/2011) = 4.8
· Dividend Yield = 4.11%
· Consistent Increase in Dividend Payment for 39 Years
· 10 Years Dividend Growth Rate = 9%
· Dividend Payout Ratio = 56%
· International Sales = 48% of Total Sales.
4. Intel (INTC, Financial):
Intel is the world’s largest computer chip maker with a virtual monopoly (>80% market share) in this segment. It is aggressively pushing its “ATOM” line of processors to gain a foothold in the tablets market and riding on the strong sales of PCs in emerging markets and the rise of cloud computing. Key figures for Intel include:
· 10 Years Sales Growth Rate = 5%
· 10 Years Earnings Per Share (EPS) Growth Rate = 26%
· Price /Earnings Ratio ( As of 08/09/2011) = 9.10
· Price/ Book Value ( As of 08/09/2011) = 2.1
· Dividend Yield = 4.22%
· Consistent Increase in Dividend Payment for 8 Years
· 8 Years Dividend Growth Rate = 23%
· Dividend Payout Ratio = 30%
· International Sales = 85% of Total Sales.
5. 3M (MMM, Financial):
3M is a diversified scientific conglomerate which has a portfolio of more than 55,000 products and operates in more than 65 countries. Strong products foothold includes industrial and transport, healthcare, display and graphics, and consumer products. Key figures for 3M include:
· 10 Years Sales Growth Rate = 5%
· 10 Years Earnings Per Share (EPS) Growth Rate = 12%
· Price /Earnings Ratio ( As of 08/09/2011) = 13.50
· Price/ Book Value ( As of 08/09/2011) = 3.2
· Dividend Yield = 2.78%
· Consistent Increase in Dividend Payment for 53 Years
· 10 Years Dividend Growth Rate = 6%
· Dividend Payout Ratio = 36%
· International Sales = 65% of Total Sales.
As mentioned earlier, these 10 iconic American companies as outlined in this two-part article makes for a sound investment in times “thick & thin” that allows investors to sleep well every night if made a core part of their portfolios. A portfolio consisting of these 10 stocks, brought at right price, provides enough diversification and concentration to promote maximum total return. Extreme fear, as was evident in the stock market recently, has hammered the prices of some of these stocks to very attractive valuations, which if held for a long run will reward investors handsomely as well as let them sleep well when the whole world around them keeps falling over and over.
