Five Companies With Powerful Brands and Strong Dividends
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Successful investing doesn't need to be complicated, especially if you are looking for rock solid companies with strong competitive advantages and attractive dividend yields. These stocks can be found among well-known businesses, and they have outstanding track records of delivering good returns through all kinds of economic scenarios.
Tide, Charmin, Pantene, Cover Girl, Pampers, Gillette, Eukanuba, Pringles, Crest, Oral-B, Ariel and Duracell are some of the brands owned by Procter and Gamble (NYSE: PG), and chances are you´ll find some of the company´s products in your house or office right now. The company has 50 leadership brands that are some of the world best known household names, and 25 of them generate more than $1 billion in annual sales.
P&G is going through a rough time lately; slowing consumer spending, higher input costs and increasing competition have been affecting the company´s growth and profitability. But management is implementing programs to increase operating efficiency and reduce costs in order to put the company back on track. Cash flow generation is out of question at Procter and Gamble, so investors can expect to be rewarded with dividends and share buybacks while they wait for the company to streamline its operations. P&G pays a 3.23% dividend yield and has a remarkable track record of 56 consecutive years of dividend increases.
Another dividend paying giant which has been facing some difficulties lately is Johnson & Johnson (NYSE: JNJ). This global healthcare and consumer player will be facing some challenges in the middle term including product recalls, patent losses and potential litigations over some important products. Perhaps for that reason, the company is trading at a record high dividend yield of 3.5%
But Johnson & Johnson is a very solid company, owning many market-leading products in areas like pharmaceutical, medical devices, diagnostics and consumer products. The company has increased dividends for 50 consecutive years, even through recessions, financial crisis and all kinds of company-specific problems. It will take some time before Johnson and Johnson leaves its problems behind, but just like with P&G, investors are being paid for their wait.
McDonald´s (NYSE: MCD) owns one of the most recognizable brands in the world, and it also has secured many of the most attractive locations for its restaurants around the planet. Those are two outstanding competitive advantages which have allowed the company to increase its dividend for the last 35 consecutive years, and the undisputed leader in the global fast food industry is currently yielding a 3% in dividends.
The trend towards healthier eating habits represents a challenge that the company will need to face in the following years, but Mc Donald´s doesn´t lack the innovative capabilities to adapt to changing consumer needs. The McCoffee stores success is a clear example about how the company can be flexible enough to capitalize emerging opportunities from shifting consumer preferences.
Do you like Coke (NYSE: KO) or Pepsi (NYSE: PEP)? That´s like asking people to choose between the Beatles and the Rolling Stones -- who says you can´t like them both? Even better, when it comes to stock investing, there are diversification advantages in having a position in both companies.
Coke has been winning the cola wars over the last years, while Pepsi has focused more on healthy drinks and snacks. Betting on the two competitors is smart way to reduce risks coming from competitive tensions and different strategic initiatives. Besides, both companies have merits on their own as dividend stalwarts: Pepsi pays a higher dividend yield of 3% versus 2.6% for Coke, but Coke has a longer track record of 50 consecutive yearly increases, 10 more years than Pepsi.
Investing in companies with indestructible competitive advantages, global presence and time-proven dividend growth policies is not the most innovative investing strategy you can apply, but it has worked wonders over the long term. These businesses have what it takes to deliver solid returns in spite of complex macroeconomic conditions, and this brings the added benefit of allowing investors to remain relaxed knowing that their money is well protected with a time proven strategy.
acardenal has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson, The Coca-Cola Company, McDonald's, and PepsiCo. Motley Fool newsletter services recommend Johnson & Johnson, McDonald's, PepsiCo, The Coca-Cola Company, and The Procter & Gamble Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
