A Trio of Consumer Defensive Stocks for the Value Investor

These businesses could enhance the resilience of your portfolio

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Sep 18, 2022
Summary
  • Inter Perfumes, Diageo and United Breweries have historically continued to generate earnings and dividends during economic recessions.
  • Wall Street sell-side analysts have issued positive recommendations for these stocks.
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If you want to make your portfolio more resilient to recessions, the following defensive stocks may be suitable options. These businesses have historically continued to generate earnings and dividends during hard economic times as they offer goods and services on which people do not typically cut their spending even in periods of financial distress.

Furthermore, as of the time of writing, Wall Street sell-side analysts have issued positive recommendations for them.

Inter Perfumes

The first stock investors could be interested in is Inter Perfumes Inc. (

IPAR, Financial), a New York-based manufacturer, marketer and distributor of various fragrances and related products in the U.S. and abroad.

For the past five years, the earnings per share excluding non-recurring items has grown by 13.90% annually, while the dividends per share have grown by 0.80%.

The company's balance sheet is strong, as evidenced by a GuruFocus financial strength rating of 8 out of 10. The rating is driven by an Altman Z-Score of 6.48, meaning the company is in the safe zone.

In terms of the profitability of its operations, a GuruFocus rating of 8 out of 10 indicates the business is very efficient at raising cash to support day-to-day operations and repay lenders while financing growth and returning cash to shareholders.

The share price closed at $78.93 on Friday for a market capitalization of $2.51 billion, a price-earnings ratio of 25.44 and a trailing 12-month dividend yield of 2.22%. The industry has a median of 17.28 for the price-earnings ratio and a median of 2.34% for the dividend yield.

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On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $100 per share.

BlackRock Inc. is the largest fund holder of Inter Perfumes, owning 8.43% of the company’s total outstanding shares. Vanguard Group Inc. and iShares Core S&P Small-Cap ETF follow, holding 6.37% and 3.91%.

Diageo

The second stock investors could be interested in is Diageo PLC (

DEO, Financial), a London-based producer and seller of alcoholic beverages.

For the past five years, the earnings per share without NRI has grown by 0.90% annually, while dividends have grown by 4% each year.

GuruFocus gave a financial strength rating of 5 out of 10 to the company, indicating the balance sheet is decent. The Altman Z score of 3.12 indicates the company is under some stress currently.

The profitability score of 9 out of 10 implies efficient operations in generating cash to meet the day-to-day requirements of running operations, developing growth projects, meeting financial obligations and returning cash to shareholders.

The stock traded at $173.91 at close on Friday for a market capitalization of $99.05 billion, a price-earnings ratio of 26.86 and a trailing 12-month dividend yield of 2.19%. The industry has a median of 20.83 for the price-earnings ratio and a median of 2.49% for the dividend yield.

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On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $207.88 per share.

Bank of America is the largest fund holder of Diageo, owning 0.87% of the company’s total outstanding shares. Morgan Stanley is second with 0.56% and FMR LLC follows in third with 0.52%.

United Breweries

The third stock investors could be interested in is United Breweries Co. Inc. (

CCU, Financial), a Chilean beverage company with activities in Chile, Argentina, Bolivia and Colombia.

For the past five years, the earnings per share without NRI has grown by 2.40% annually, while dividends have grown by 23.70%.

GuruFocus assigned a financial strength of 6 out of 10 to the company's balance sheet. This means the financial health of United Breweries' operations is good, though the Altman Z-Score of 2.22 indicates a moderate risk of bankruptcy within a few years.

The profitability rating of 8 out of 10 implies the business generates the cash flow to support ongoing operational needs, service all debt, fund growth and return cash to shareholders.

The stock traded at $10.34 at close on Friday for a market capitalization of $1.91 billion, a price-earnings ratio of 10.15 and a trailing 12-month dividend yield of 16.41%. The industry has a median of 20.83 for the price-earnings ratio and a median of 2.49% for the dividend yield.

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On Wall Street, the stock has a median recommendation rating of hold with an average target price of $15.29 per share.

First Eagle Investment (Trades, Portfolio) is the largest fund holder of United Breweries, holding 7.82% of the company's total outstanding shares. Mawer Investment Management Ltd. and the First Eagle Overseas Fund follow, holding 5.33% and 5.08%.

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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