Will These Stable Stocks Provide Outsized Returns In 2013?

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As investors continue to experience market uncertainty surrounding the direction of the Federal Reserve now and whether they’ll keep interest rates near 0% until either 2013 or 2015, we are all left scratching our heads wondering where the best place for us is to put our investment capital to work. Historically speaking, consistent, stable industries are justifiably more coveted and there are few industries that fit that bill better than food and beverage as people need to eat and drink regardless of their financial situation. The following are stocks that match that investment philosophy, while dishing out attractive dividend yields, and hopefully serve as a nice stating point in your investment research:

Diversified food giant General Mills (NYSE: GIS) is a company that makes everything from cereal to frozen vegetables to ice cream and has been doing that for over 80 years since its founding in Minnesota in 1928. The firm is simply a giant with a trailing twelve month revenue base exceeding $17 billion and a market capitalization exceeding $26 billion. With the average S&P 500 stock yielding 2%, the 3.2% dividend yield of General Mills has my attention along with the fact that the company has a consistent business that should further benefit with the rise of the global middle class and hundreds of millions of consumers that will bring on-board. Add in the fact that the company pays a rather low 59% dividend payout ratio and investors should feel confident that the great dividend is not only safe, but likely to rise in the coming future. Fellow competitor Kellogg (NYSE: K) is a nice company to diversify one’s GIS holding as the company has many of the same attributes. Having a strong revenue base exceeding $13.5 billion and market capitalization at approximately $20 billion allows Kellogg to benefit from great economies of scale. Add in the fact that he company yields a great 3.1% dividend yield and similarly low 52% payout ratio, while benefiting from the same growth drivers going forward and I think both of these great firms make for two solid income holdings.

Beverage giant Dr Pepper Snapple Group (NYSE: DPS) is well-known for its namesake brand along with having other diversified drinks, such as 7UP, Schweppes, and Canada Dry. The company has performed well lately, exceeding consensus analysts’ estimates in each of the last four quarters, while its revenue base has hit approximately $6 billion the past twelve months. Perhaps most notably, the company yields an attractive 3.0% dividend yield, which has consistently been raised during the economic carnage of the last 4-5 years and with a current 47% payout ratio, investors should feel confident that will continue. Fellow competitor and behemoth PepsiCo (NYSE: PEP) offers some attractive attributes as well. Churning over $65 billion in sales and net income at approximately $6 billion shows us that PepsiCo is for real. Add in its juicy 3.1% dividend and relatively small 56% payout ratio, one has to believe that it will be raised, as management has done very well over the decades, real soon making the stock even more attractive in this volatile environment.

I’d like to also say I appreciate you reading my thoughts and reiterate that these are just the views of the blogger and should not serve as a substitute for any professional financial advice or counsel in general. Respectful comments and questions are always welcome below on the comment board.


Wiseinvestors has no position in any stocks mentioned. The Motley Fool recommends PepsiCo, Inc.. The Motley Fool owns shares of PepsiCo, Inc.. 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!

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