3 Consumer Stocks With Huge Dividends and Giant Buybacks
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Goldman Sachs' Robert D. Boroujerdi and his team recently published a report recommending the 27 best stocks with high dividend yield and significant potential accretion from buy backs. The following is a list of 3 consumer stocks which are featured in the list:
Source: Goldman Sachs
I believe these stocks make a good buy at current levels. Here is a look at these stocks in detail.
With 9th consecutive quarters of growth in the US and solid performance in Asia, Coca-Cola’s fundamentals seem to be going in the right direction. As a leader, with its investment in packaging, product innovation and marketing efforts in emerging markets, there is still lot of potential of growth even with a negative economic outlook. Lack of other compelling growth names, and clear margin upside drivers like global market growth, market share gains, profitability improvements and reinvestment of free cash flows further strengthens the bullish viewpoint.
KO continues to grow volume and value share while focusing on productivity and cost savings. Its 4-year productivity initiatives are likely to save it $550-$650 million annually. The plans of divestiture of its bottling facilities in Germany and the Philippines will further improve its baseline. On the other hand its recent partnerships with Nestle and Aujan will continue to drive long-term value for all shareholders.
Keeping in mind a striking dividend yield of 2.68% and a recent positive go-ahead on its long term debt rating from S&P (updated 9/13) due to continued strong global operating performance, I recommend this as a buy.
With better than expected last quarter earnings and strong business momentum; William Sonoma’s stock price is trading near its all time highs. Its flagship home furnishing segment has shown sales improvement from last year. WSM has been investing heavily in product differentiation, merchandising marketing and supply chain capabilities and this will surely help it tap the upcoming holiday season.
In the long run its plan of launching Starbucks Verismo and a series of programs (like Agrarian & Pottery Barn Dorm) will help it maintain momentum. Additionally, WSM is expanding its operations globally. It has plans to open 4 new stores in Australia in FY13, which will further improve revenue. WSM already has online presence in Australia.
Note that WSM has already taken initiatives around increasing private label. This will help offset pressures from shipping promotions. Whereas, continued shift to more online sales also helps contribute to better operating margins.
I feel WSM’s current valuation doesn’t reflect its underlying growth potential, and keeping in consideration following factors, I recommend it to be a strong buy:
- Gradual influence of mix shift towards DTC
- Strong balance sheet with increasing cash returns to shareholders
- Continued Product differentiation
- Overabundance of High return projects
- Improving Domestic housing market and untapped international growth opportunity
Campbell Soup Co.
Campbell possesses some of world’s best known brands including Campbell, pace, Prego, Swanson and Pepperidge Farm. In addition it also has plans for expanding current brands and launching 50 new products in 2013.
Existent strong relationship with retailers will give CPB a very good base for display, an important driver in consumer purchases. Its strong focus on product innovation based on taste preferences and brand building activities will result in improvement to its bottom-line. On the other side, a continuous focus on R&D in the sauces market will help it gain a leadership position internationally. Its acquisition of Bolthouse will help it to expand in the fresh juice category adding one more significant source of revenue.
Additionally, it has decided to shut down 2 of its manufacturing plants in its streamlining plans. This will reflect in improvement in its profit margins in the coming quarters. Campbell Soup is trading at a forward PE of 12.89x and I will recommend buying it given its impressive yield, buybacks and positive fundamental trends.
To sum up, these three high dividend stocks appear to be a good buy at current levels. Coca-Cola continues to gain market share, and its focus on various productivity and cost saving initiatives will further improve its bottom-line. William Sonoma has strong earnings momentum and I expect it to continue in the upcoming holiday season due to investments in product differentiation, marketing and supply chain initiatives. The company is also establishing its footprint in the global market which represents a strong long term growth opportunity. Campbell's new product launches and management’s focus on the bottom-line will help it in sustaining earnings momentum.
AnjaliPaliwal has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend The Coca-Cola Company and Williams-Sonoma. 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.