Consumer Stocks That Won't Disappear
Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Go down to your local store and look at what people have in their shopping carts. Chances are you will see some candy made by The Hershey Company (NYSE: HSY), perhaps some chips made by PepsiCo (NYSE: PEP) and even a case of Coca-Cola (NYSE: KO). Consumers don’t have to buy these items, they choose to. They are probably the cheapest ‘feel good’ items around.
What is one gift that’s easy to give at Christmas? Chocolate! What about Valentine’s Day? Chocolate again. Feeling down? Try some chocolate! Chocolate is such a simple thing and a lot of companies make a lot of money selling it. Hershey’s is one of the biggest chocolate makers in the world and they thrive in any economy.
Hershey’s has had growing revenues every single year over the last decade. Profits have also been growing at the company and I don’t foresee that stopping in the future. Even if another recession hits, people will still spend $1 on a chocolate bar. It may be a little less chocolate that they are buying but you can’t reasonably see this company going away.
Hershey’s manufacturers some of the world’s most well-known products such as their namesake the Hershey bar, Kit Kat (under license from Nestle in US), Reese’s and York Peppermint Pattie. These products, and the rest of the portfolio, earned Hershey $2.82 per share in FY 2011. That figure is expected to grow by 27% to $3.59 by FY 2013 end.
Want a dividend? You’ve got one! The company pays a 2.3% dividend with a 6.9% dividend growth rate over the last three years.
Who Doesn’t Love Coca-Cola?
I have a can of Coke sat beside me right now! The company has made incredible amounts of money from what is almost a single product and they will continue to do so. Coca-Cola sells their namesake brand and many varieties of it around the world. In addition to Coca-Cola they sell many varieties of bottled water, juices, Sprite and energy drinks.
Coca-Cola’s sales continue to grow at an incredible rate as the company moves into the emerging markets and begins to assert their dominance in those markets. Earnings are great too. The company earned $1.92 in FY 2011, growth through till 2013 is expected to be 13%. It’s nothing to write home about but for such a firm, strong-standing American icon, it’s worth it.
Coca-Cola pays a dividend to investors and that dividend of 2.7% has grown 6.04% over the last three years.
Diversify, Drinks and Snacks!
If you want to play in the snacks and drinks market then PepsiCo could be a great play for you. Pepsi’s biggest business is actually not Pepsi. They make more money, from Frito Lay, Quaker Foods and their other international snack brands. In addition to all of the snacks they do have their Pepsi, Gatorade and Tropicana brands.
PepsiCo is not projected to have much growth in their EPS through till FY 2013. FY 2011 EPS was $4.40 and FY 2013 is expected to be $4.41, a growth of 0.2%. Of course, this is a fantastically diverse company that will likely produce great gains in the long term and it should definitely be worth a deeper look.
PepsiCo is a popular stock with Wall Street analysts. Their P/E is pretty lofty which signals investors' beliefs in potential for future growth and the stock presents investors with a 3.1% dividend yield.
I think all three stocks will outperform the market in the long haul. Out of the three stocks, Coca-Cola will probably have the slowest rate of growth. The company shows no signs of faltering any time soon as it expands into Africa and other developing regions.
With their snack business, PepsiCo will continue their growth and it will probably be at a higher rate than what Coca-Cola will see.
Hershey's will continue to perform in an up or down economy as chocolate is one of those great little treats that will find its way into the shopping carts of customers worldwide.
Ash1402 owns shares of The Coca-Cola Company. The Motley Fool owns shares of PepsiCo. Motley Fool newsletter services recommend The Coca-Cola Company and PepsiCo. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!