Investing in the best
is not only about buying companies with big and growing cash
flows. Investors need to understand the competitive strengths in
the business producing those cash flows in order to position
their portfolio in companies having enough soundness to sustain
capital distributions over time.
Brand power is a crucial source of competitive strength in the
consumer business, and companies such as
Procter & Gamble
benefit from rock-solid brand power, allowing them to deliver
consistently growing capital distributions for shareholders over
the long term.
Coca-Cola's sweet dividends
Coca-Cola is the undisputed leader in the global soft drinks
market, Coca-Cola and Diet Coke are the two most consumed soda
brands in the world, and the company owns an impressive portfolio
of 17 brands, each making more than $1 billion in global
revenues. In addition, the company has a pipeline of 20 more
sparkling and still beverage brands generating annual sales of
between $0.5 billion and $1 billion each.
Consumers are moving away from traditional sodas in exchange
for healthier choices in main markets such as the U.S., so brand
Coca-Cola sales volume increased only 1% in North America during
the second quarter of 2014.
Adapting to the trend toward healthier drinks is a
considerable challenge for Coca-Cola when it comes to reigniting
sales growth, but the company is actively expanding into
different categories to satisfy the always-evolving needs of
global consumers. Still beverage volume, which includes products
such as sports drinks, tea, energy, coffee, and water, increased
5% during the second quarter.
Coca-Cola has recently announced a partnership with
by which the soda giant is purchasing nearly 16.7% of Monster for
$2.15 billion. The companies will also exchange some of their
brands, and Monster will have access to Coca-Cola's gigantic
distribution network in the U.S. and Canada.
Even if energy drinks are quite questionable when it comes to
their health implications, the partnership with Monster shows
that Coca-Cola's deep pockets and unique distribution network are
enormously valuable assets when it comes to generating growth via
Coca-Cola has an amazing track record of dividend growth; the
company has increased its dividends over the last 52 consecutive
years, including a 9% hike for 2014. The payout ratio is below
60% of average earnings estimates for 2014, and the stock pays a
dividend yield of 3.1%.
Procter & Gamble stands the test of time
Procter & Gamble has a truly exceptional trajectory when it
comes to dividend payments. This global leader in different
household categories has paid regular dividends since its
incorporation in 1890, a whopping track record of 124 consecutive
years of consistent capital distributions. In addition, Procter
& Gamble has raised dividends during the past 58 years
Procter & Gamble pays a dividend yield of 3.2%, and the
payout ratio is around 58% when compared to average earnings
estimates for the fiscal year ended on June 2015.
Source: Procter & Gamble.
The company is streamlining its brand portfolio to concentrate
on its most promising names. Procter & Gamble intends to
maintain a more focused portfolio of 70 to 80 brands, many of
which are leaders in their categories. This includes 23 brands
with annual sales of $1 billion to $10 billion, 14 brands with
sales of $0.5 billion to $1 billion, and 30 to 40 brands with
sales of between $100 million to $500 million.
In addition, management is planning to save approximately $10
billion in annual spending via productivity enhancements over the
coming several years.
Being a market leader in a stable and mature industry, it's
not easy for Procter & Gamble to generate sales growth. On
the other hand, this also provides reliability and predictability
to the company's cash flows, a key consideration to keep in mind
when investing in dividend stocks.
Colgate-Palmolive makes investors smile
Colgate-Palmolive is a worldwide leader in oral care. The company
does business in more than 225 countries and produces over 75% of
sales in international markets. Management estimates that the
company owns a global market share of 44.3% in toothpastes, 33.5%
in manual toothbrushes, and 38.5% in mouthwashes.
The company has built a deep relationship with dental care
professionals around the world, making it the most recommended
brand in the industry for a wide margin. This is a big advantage
for Colgate-Palmolive in terms of brand awareness and product
Foreign currency fluctuations are being a drag on performance
lately, but a big presence in international markets allows
Colgate-Palmolive to generate considerable growth rates for a
company of its size. Organic sales, meaning sales excluding
foreign exchange fluctuations, acquisitions, and divestments,
grew 4% annually during the second quarter in 2014.
Colgate-Palmolive pays a dividend yield of 2.3%, and the
payout ratio in the area of 48% of earnings forecasts for 2014
leaves ample room for further dividend increases. The company has
paid uninterrupted dividends since 1895, and it has raised its
distributions for 51 years in a row.
Dividends don't only provide income for investors; a solid
trajectory of dividend growth is a strong reflection about a
company´s quality and fundamental strengths. Coca-Cola, Procter
& Gamble, and Colgate-Palmolive rely on powerfull brands to
differentiate their products from the competition, and this says
a lot about these companies and their ability to consistently
increase dividends over years to come.
Top dividend stocks for your portfolio
The smartest investors know that the
can crush their non-dividend paying counterparts over the long
term. That's beyond dispute. They also know that a
well-constructed dividend portfolio creates wealth steadily,
while still allowing you to sleep like a baby. Knowing how
valuable such a portfolio might be, our top analysts put
report on a group of high-yielding stocks
that should be in any income investor's portfolio. To see
our free report on these stocks, just
click here now
3 Dividend Stocks With Rock-Solid Brands
originally appeared on Fool.com.
has no position in any stocks mentioned. The Motley Fool
recommends Coca-Cola, Monster Beverage, and Procter & Gamble.
The Motley Fool owns shares of Monster Beverage and has the
following options: long January 2016 $37 calls on Coca-Cola and
short January 2016 $37 puts on Coca-Cola. Try any of our Foolish
free for 30 days
. We Fools may not all hold the same opinions, but we all believe
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makes us better investors. The Motley Fool has a
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