Merger and acquisition activity is lifting the bid for many
consumer stocks. In the past few weeks,
Fortune Brands (
said it would focus on its spirits business, including Jim Beam,
and split off its consumer goods and sports products, making them
ripe for acquisition. And an investor group headed by Kohlberg
Kravis Roberts is looking to unlock the value in
Del Monte Brands (
which it's acquiring for $5.3 billion.
Manufacturers of consumer products weren't uniformly impacted by
the recession, mostly because some make necessities as well as
There are two particular small-cap consumer product makers that
currently fly under investors' radar screens - and one even pays a
'hidden' dividend every year.
These companies are the type of defensive plays that every
portfolio needs in a recovering economy, and might be worth your
attention if potential suitors continue their holiday shopping
Typically when investors look at defensive stocks, the names
that pop up include conglomerates like
General Electric (
restaurant chains such as
consumer products makers like
Procter & Gamble (
or utilities such as
American Electric Power (AEP).
But burrowing down to the defensive small-caps means investors
can still expect handsome returns, even without an aggressive
investing approach. The two companies that I've found make
items that are probably already in your home, but maybe you've
never realized that you can actually buy stock in the
The first company is the maker of personal-care products and
operates in the shadows of P&G - and it knows when to pull the
trigger on acquisitions. Its name has roots in Greek mythology and
refers to a symbol of legendary beauty.
Helen of Troy (Nasdaq: HELE)
makes an assortment of personal-care items and house-wares, but
it's best known for its hair products. The company licenses such
trademarks as Vidal Sassoon and Revlon, and owns a broad portfolio
of brands including Pert, Final Net, Vitalis and its namesake Helen
of Troy. It sells housewares under the Sunbeam, Dazey and OXO
brands, among others.
Helen of Troy reported a loss in 2008, but charged back in 2009
with a $71.8 million profit. The company has exceeded analyst
quarterly earnings estimates the past four periods, typically by 5
The company also just announced that it was paying $260 million
for privately held Kaz, which markets products under licensed
brands such as Vicks, Braun and Honeywell. Earlier in 2010, it
acquired the Pert and Sure businesses. Helen of Troy, which has
little debt on its books, offered to pay cash for Kaz, and said the
deal will be accretive to 2011 results.
***The other company is an old name in kitchen appliances, maybe
one that is more familiar with your grandparents than to you. The
National Presto Industries (NPK),
the Wisconsin maker known for the pressure cookers that have been
in use for more than a century.
Over the years, the Presto brand has expanded to include
saucepan-size pressure cookers, steam irons and electric frying
pans, to name a just few products. More recent additions are the
Salad Shooter slicers, frozen pizza ovens and hot-air popcorn
National Presto is also a defense contractor, making specialty
ordnance including ammunition and firing devices.
If you use a typical stock screener, you might see a dividend of
just $1 from National Presto. But beyond its $1 regular annual
dividend, the company also has been routinely paying a special
performance payment, which in recent years has been huge. In March,
it paid the base dividend, but tacked on $7.15, raising the
effective yield to 6.2 percent. That special dividend is something
that has generously grown since 2004's $0.25 offering.
The stock has started to catch fire, rising 15 percent in the
past month and 20 percent year-to-date. But with a forward P/E of
12.90, National Presto still shows some good bargain potential,
especially considering that special dividend.
I've been looking for growth companies that are also
dividend-payers, and I've got a couple up my sleeve.
here to learn more about the two stocks I've found with yields over