One of my favorite charts shows a listing of eleven consumer goods companies and their brands. It reinforces my belief that strong brands increase dividends.
You can view this graph from here:
This figure shows these giant companies that control large parts of a particular segment of the market. While the sheer number of brands gives the illusion that there is an unlimited choice, the reality is that few brands regularly monitor what you buy. It looks like there is a lot of competition when in reality few companies control many of the brands we buy. The sheer range of brands is fascinating.
This is understandable when you consider that many companies own brands that target different segments. Many of these companies have established relationships with shelf space retailers. Many of these retailers value these brands because consumers expect and want them. It’s a mutually beneficial relationship.
This, of course, is the result of creating new brands from scratch as well as decades of consolidation through mergers and acquisitions.
As an investor, I like to look at companies with solid brands that consumers keep buying. I also like the consumer goods companies because they sell goods that consumers would buy in a recession. I like companies with big brands that are dominant because I believe that a successful company that has been successful for a long time is likely to continue to be successful in the future. Scalability is helpful for getting the lowest unit cost because marketing, purchasing, and sales are centralized. The more successful you become, the more you stack the odds in your favor.
The companies listed in this graphic represent some good ideas for further research. They are not, of course, automatic purchases. When I review companies, I generally like to pay attention to:
1) A track record of increasing dividends annually
2) Earnings per share growth over the past decade
3) Dividend per share growth over the past decade
4) Sustainability of the dividend
5) Good entry-level rating
I like the stability of their business models. These companies are slowly but steadily developing well and are coping well with the short-term economic turmoil. While past performance is not an indication of future results, I believe these companies will continue to dominate for the next 50 years. If you are reading this in 2071, please let us know how that prediction turned out.
The companies included in the graphic are:
Coca-Cola (KO) is a beverage company that manufactures, markets and distributes a variety of non-alcoholic beverages worldwide.
The company is a dividend king with a 59-year track record of consecutive annual dividend increases. Over the past decade, Coca-Cola has managed to grow dividends at an annualized rate of 6.40%.
The stock is selling for 25.53 times forward earnings and is now yielding 3.01%.
Unilever (UL) is a fast moving consumer goods company. The company operates in the segments Beauty & Personal Care, Foods & Refreshment and Home Care.
Unilever is an international dividend provider that has been increasing its dividends for 25 consecutive years. Unilever has managed to grow dividends at an annualized rate of 7.20% over the past decade.
The stock is selling for 20.33 times forward earnings and is now yielding 3.43%.
PepsiCo (PEP) operates worldwide as a food and beverage company. The company operates in seven segments: Frito-Lay North America; Quaker Food North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China.
The company is a dividend aristocrat with a 49 year track record of consecutive annual dividend increases. PepsiCo has managed to grow dividends at an annualized rate of 7.80% over the past decade.
The stock is selling for 25.04 times forward earnings and is now yielding 2.76%.
Kelloggs (K) produces and sells ready-to-eat cereals and ready meals. The company operates in four segments: North America, Europe, Latin America and Asia, Middle East, Africa.
The company is a dividend high achiever with an 18 year track record of consecutive annual dividend increases. Kellogg’s has managed to grow dividends at an annualized rate of 3.90% over the past decade.
The stock is selling for 15.94 times future earnings and is yielding 3.58% today.
Mondelez (MDLZ) manufactures, markets and sells snack and beverage products worldwide.
The company was founded in 2012 when Kraft Foods split in two. Mondelez has managed to increase dividends annually since the split. Over the past five years, Mondelez has managed to hike dividends at an annualized rate of 12.80%.
The stock is selling for 21.94 times future earnings and is yielding 1.97% today.
Johnson & Johnson (JNJ) researches, develops, manufactures and sells a range of healthcare products worldwide. The company operates in three segments: Consumer Health, Pharma and Medical Devices.
The company is a dividend king with a 59-year track record of consecutive annual dividend increases. Over the past decade, Johnson & Johnson has managed to grow dividends at an annualized rate of 6.60%.
The stock is selling for 17.47 times the forward gains and is now yielding 2.54%.
Nestlé (NSRGY) operates as a food and beverage company.
Nestlé is an international dividend aristocrat who has managed to increase dividends annually since 1995. He has managed to grow dividends at an annualized rate of 4% over the past decade. For more information about the company, see my analysis of Nestlé.
The stock is selling for 26.07 times forward earnings and is now yielding 2.38%.
Procter & Gamble (PG) offers branded packaged goods to consumers worldwide. It operates in five segments: beauty; Personal hygiene; Health care; Fabric and household care; and baby, women and family care.
The company is a dividend king with a 65-year history of successive annual dividend increases. Over the past decade, Procter & Gamble has managed to grow dividends at an annualized rate of 5.20%.
The stock is selling for 24.96 times forward earnings and is now yielding 2.48%.
General Mills (GIS) produces and markets branded foods worldwide. The company operates in five segments: North America Retail; Convenience stores & food service; Europe & Australia; Asia & Latin America; and pet.
General Mills raised dividends for 1 year. The company lost its status as a dividend booster in 2018. That ended a 15-year streak of consecutive annual dividend increases. However, over the past decade it has managed to grow annual dividends by 5.95%.
The stock is selling for 16.29 times the forward gains and is yielding 3.36% today.
Kraft Heinz (KHC) produces and sells food and beverages.
Kraft Heinz was created from the merger of Kraft Foods and Heinz. Unfortunately, the company cut dividends a few years ago and left them unchanged. Kraft Foods had split in two in 2012 and had previously managed to increase payouts for a number of years.
The stock is being sold for 14.80 times the forward gains and is now yielding 4.07%.
Mars Inc is a privately held company. It is owned by members of the Mars family.