Consumer Goods: Two Candidates for the Perfect Stock
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the market continues to struggle and find its footing, most investors are left wondering what is the best investment strategy for their “Foolish” portfolio. I don’t know about you, but I personally invest to find the right balance between income (dividend) and appreciation (a stock price higher than when I bought it). Granted, that’s much easier said than done, but after some extensive research and follow-up analysis, below are a few stocks that I believe will outperform the market in the long-run.
Healthcare giant Johnson & Johnson (NYSE: JNJ) has continually shown its stability in an up, down, or sideways economy ever since its founding in 1886 This may be most evident this prior quarter when management raised its dividend for the 50th consecutive year which is now sitting at a very nice 3.8% yield: double the average yield of a S&P 500 stock at 1.9%, represented by the SPDR S&P 500 (NYSEMKT: SPY). That means the company has annually raised its dividend since 1962 through recessions, wars, stock and real estate bubbles exploding, the current depression (at least in my view, regardless of the general media euphemistically referring to it as “The Great Recession”) and changes in consumer desires. With the companies diverse product line including well-known products Neutrogena, Neosporin, Tylenol, Sudafed, and many others, I feel relatively confident that JNJ will continue to perform well and rate it a buy. Add in the fact of the literally billions more in potential consumers of JNJ products from the continuing growing middle-class of the BRIC (Brazil, Russia, India, and China) countries and relatively low payout ratio of 62%, and that just makes me all the more confident.
Consumer behemoth Procter & Gamble (NYSE: PG), like JNJ, is another longstanding company dating back to 1837 in good ol’ Cincinnati. The company has paid uninterrupted dividends all the way back to 1890, which is simply incredible. Of course, history doesn’t guarantee future performance as many investors in former blue-chips Washington Mutual, Lehman Brothers, Bear Stearns, and General Motors can attest to. Still, PG looks to be different in that management has proven its dexterity in adapting to different economic cycles. Moreover, management just raised its dividend approximately 7% this past quarter and now has a very nice 3.5% dividend yield. With a plethora of products that continue to perform well, including Gilette, Head & Shoulders, Crest, Tide, and Duracell, look for PG to continue to outperform the general market. Moreover, with the same growth prospects that JNJ will enjoy with the economic growth in BRIC countries, PG also sports a low 64% payout ratio further giving me confidence that the company will continue its exemplary dividend track record.
As I mentioned above, any comments/questions are always welcome here on the message board below.
Prohomes has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson and JPMorgan Chase & Co. Motley Fool newsletter services recommend General Motors Company, Johnson & Johnson, 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.
