3 Dividend Stocks to Consider
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you’re an income investor, the following three stocks could add some punch to your portfolio. If you’re not, research dividend paying entities such as the three listed below as possible components of a balanced stock portfolio.
Kimberly-Clark (NYSE: KMB)
Kimberly-Clark manufactures and markets personal care, consumer tissue, and health care products. What do I like about Kimberly-Clark?
Recently, Kimberly-Clark’s board declared a regular quarterly dividend of $0.81 per share. Of note to investors is that this dividend marks the 41st consecutive year that the company has increased its dividend (79th straight year Kimberly-Clark has paid a dividend).
The company’s products include Huggies, Pull-Ups, Kotex, Kleenex, Depend, Scott, Cottonelle, Viva, and many more. Investors can note that these are well-known, well-respected brands. They've a history of sales performance and delivering what consumers want concerning products that people use every day. This “everyday use” of its products is what drives earnings.
Kimberly-Clark’s total revenue for 2012 was $21.063 billion. This represents an increase over 2011’s $20.846 billion, and 2010’s $19.746 billion. For the quarter ended March 31, the company had total revenue of $5.318 billion, an increase over the prior quarter’s $5.307 billion in total revenue.
Significant for investors is that Kimberly-Clark continues to build sales. The company is reaping durable sales from traditional core brands that consumers trust. This indicates continued innovative and aggressive marketing, which pays dividends for the company and shareholders’ alike.
Kimberly-Clark’s total cash flow from operating activities was $3.288 billion in 2012, in comparison to 2.288 billion in 2011, and 2.744 billion in 2010. In a January 2013 earnings call, Mark Buthman (Chief Financial Officer, Senior Vice President) noted that, "... cash provided by operations in the fourth quarter was an all-time quarterly record of $1.1 billion. That is more than double our year-ago performance driven by improved working capital and lower pension contributions."
Investors can take away that Kimberly-Clark expects further progress for FY2013 as it improves its working capital cash conversion cycle. This is conducive to better operating cash flow. Strong cash flow enables Kimberly-Clark to pay regular dividends and increase those dividends regularly - as noted above.
McDonald's (NYSE: MCD)
A global fast-food icon, McDonald's franchises and operates its restaurants (more than 34,500 locations). What do I like about McDonald's?
McDonald’s board recently declared a quarterly cash dividend of $0.77 per share . Important for investors is that it has raised its dividend each year, ever since it paid its initial dividend (1976).
I believe McDonald's will continue to be a dividend growth company to invest in. In the ultra-competitive fast-food arena , with the attendant tough economic climate, the company still increased revenues, EPS, and operating income in 2Q 2013. McDonald's has experienced an array of business volatility in its history and keeps pumping out dividends and dividend increases.
McDonald’s profit margin for the trailing twelve months (ttm) is 19.85%. Investors should note that with margin pressures (as restaurants try to lure customers in with specials because of consumers curtailing spending on out-of-home meals) McDonald’s continues to lead the pack as concerns profit margin versus its top two competitors.
McDonald’s is still a burger selling behemoth compared to others of its ilk.
As Burger Business noted for 2012, “McDonald’s continues to dominate in both global and domestic sales. In the U.S., the chain reports company-store sales last year of $4.53 billion and franchise-store sales of $31.063 billion, for a domestic total of $35.59 billion. That easily maintains its status as the largest single restaurant brand of any type in the world. Led by McDonald’s $88.29 billion, combined global system-wide sales for these burger chains last year were $124.04 billion.”
McDonald’s has an ongoing commitment to growth and the introduction of new products. It's entering the Vietnam market, recently announcing a developmental licensee for the country. Its intention is for the first McDonald’s to open in early 2014 in Ho Chi Minh City.
Significant for investors is that many U.S QSR franchises are or have moved into Vietnam. Ho Chi Minh City has a population of approximately 7,162,864 people (2009 Census). It's a major market for new sales and a foundation in the nation to expand out from.
As Nathaniel Matherson noted in his Motley Fool blog post "Why Investors Should Care About Vietnam", "The promise of rising incomes and increasing educational importance bodes well for discretionary spending and therefore the company over the longer term."
McDonald's said in a recent earnings call concerning global markets that it had positive performance in South Africa, Singapore, and South Korea. The company said "We remain confident in our ability to drive future performance in China." Investors should consider companies who continually seek new markets and pursue greater sales through upgrading and enhancing core menus.
CEO Don Thompson noted in a Bloomberg TV interview, for McDonald's to continue to grow it has to appeal to customers. He noted this is the reasoning behind new products such as “Egg White Delights,” new chicken entrees, real fruit smoothies, and such.
The Toronto-Dominion Bank (NYSE: TD)
Toronto-Dominion, Canada’s second largest bank, offers financial and banking services in North America and worldwide. What do I like about Toronto-Dominion?
In May, the Bank declared a dividend of $0.81 per fully paid common share for the quarter ended July 31, 2013. Toronto-Dominion’s 52-Week projected yield is 3.70% and its 6-year average yield is 3.35%. The Bank has made 67 dividend payments from October 10, 1996 to the present. For investors seeking consistent income, Toronto-Dominion is a solid bank choice.
Toronto-Dominion reported 2Q 2013 total revenue of C$6.00 billion. This was up 4% from C$5.75 billion the year prior. Its 2Q net income was C$1.72 billion. This is an increase over C$1.69 billion in the same quarter the year prior. Of note to investors - Toronto-Dominion’s managing growth in a global banking climate still not fully recovered from the fallout of the financial crisis.
Toronto-Dominion has increased vigor in the U.S. market. The Bank’s CFO, Colleen Johnston, said in May, “We’ve had consistently strong volume growth in the United States and for some time now the U.S. has outpaced Canada. We’re seeing fundamentals strengthen in the United States versus our expectations.”
Toronto-Dominion’s profit margin for the trailing twelve months is 30.64%. This is greater than Canada’s largest bank, the Royal Bank of Canada (NYSE: RY) whose profit margin for the same trailing period is 27.21%. Investors should note growth in the U.S., as mentioned, as a driver for Toronto-Dominion’s sustained overall corporate strength.
Consider the above-mentioned dividend stocks and conduct the appropriate due diligence to see if they fit your investing profile. A company offering a bundle of consumer products, a burger entity, and a bank may be just what you need to diversify your portfolio, while adding consistent dividend income.
Michael Ugulini has positions, long, in McDonald's (NYSE:MCD) and Toronto-Dominion Bank (NYSE:TD). The Motley Fool recommends Burger King Worldwide, Kimberly-Clark, and McDonald's. The Motley Fool owns shares of McDonald's. 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!