These Consumer Giants Will Reward You For Decades
Bob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investors who consider themselves stock market historians have likely heard of the research done on the best-performing stocks to have owned over the past 60 or 70 years.
Among these stocks that have richly rewarded their investors for so many years are many consumer goods companies. You might be shocked to find out that some of the market’s best-performing stocks have come from such slow-growing industries.
However, the slow-and-steady nature of consumer products is the exact reason for their success. And, even better, many of these stocks can be bought today for reasonable prices, virtually ensuring decades of strong returns.
Slow-and-steady: the true path to prosperity
Consumer products are purchased every day across America, regardless of the latest market-rattling headlines.
Procter & Gamble (NYSE: PG) is a legend among companies that have stood the test of time, thanks to its stable of successful brands. Some of these brands include Pantene, Bounty, Charmin, Pampers, Crest, Tide, and Gillette.
Kimberly-Clark (NYSE: KMB) is the consumer goods giant behind such brands as Huggies, Kleenex, and Cottonelle.
Clorox (NYSE: CLX) is an industry leader with many well-known brands under its umbrella. The company sells its products in more than 100 countries, and has many household brands including its namesake bleach, Kingsford charcoal, Pine-Sol cleaner, and Glad trash bags. Nearly 90% of Clorox’s brands hold the No. 1 or No. 2 market-share positions in their categories.
Fortunately for potential investors, these stocks have come off their recent highs and are now trading at reasonable valuations. Thanks to fears of the Fed taper, in which our central bank reduces its monthly bond purchases designed to keep interest rates low, high-yielding stocks have declined in recent weeks.
Kimberly-Clark, P&G, and Clorox each trade for 19 times earnings, down from even higher multiples just a few weeks ago. These stocks still aren’t screaming bargains, however, as evidenced by the fact that they still trade at a premium to the multiple on the S&P 500, which still stands in the high teens.
At the same time, though, premium stocks usually command premium valuations. These stocks have proven to be far better businesses than the bulk of the S&P components, and offer greater yields than the broader market. Consider that each of these stocks now yields 3.3% or higher--strong yields in the low-rate environment.
Dividend track records to help you sleep at night
These companies not only provide reliable cash flow in good or bad economic climates, but they also do a great job of sharing their success with shareholders in the form of strong dividends. Even better, these companies have proven their commitment to shareholders by paying and raising their payouts for years in a row.
P&G is quite simply the gold standard of dividend-paying consumer stocks. Earlier this year it increased its dividend by 7%. This year marks the 123rd in a row of consecutive dividend payments since the company’s incorporation in 1890. Furthermore, P&G has increased its dividend for 57 years in a row.
Clorox recently raised its dividend by 11%, marking the 36th consecutive year of a dividend increase. Kimberly Clark has raised its dividend for 41 years in a row, and has paid dividends for 79 consecutive years.
Enjoy decades of gains to come
It may be surprising that consumer goods stocks can be the foundation of a rewarding long-term portfolio. After all, you’re not likely to read about soap or tissues as the next major growth story, and you’ll probably not see a segment on CNBC devoted to consumer staples as the sexy new investing idea.
At the same time, there’s something to be said for slow-and-steady types. The companies that have stood the test of time have done so because of the reliable nature of their products. People are extremely unlikely to pare back spending on everyday items, even when under financial distress.
As a result, these stocks have lasted for decades, and will continue to last for the foreseeable future. These stocks are now reasonably valued, and will provide their owners with steady profits and strong dividends for several decades to come.
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Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and Procter & Gamble. 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!