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Tupperware Offers Steady Earnings, Dividend Growth

Posted
1/9/2013 5:54:00 PM
By: Investor's Business Daily
Referenced Stocks:HLF;TUP

Direct-sell companyTupperware ( TUP ) offers two characteristics that income investors find desirable.

First, earnings growth is stable. The five-year EPS Stability Factor is 4 on a scale that runs from 0 (calm) to 99 (wild).

Second, the dividend shows growth. The quarterly payout has increased from 22 cents a share to 36 cents a share from 2009 to 2012 -- a 64% increase in roughly three years. The annualized yield is 2.2%.

Yet, two other factors are worth noting -- the changing character of the company and recent chart action.

Tupperware passed a tipping point in 2008 when emerging markets accounted for 50% of total revenue for the first time. In the first nine months of 2012, emerging markets drove 62% of revenue.

The company is increasingly an emerging markets play. Risk comes with it. A strong U.S. dollar can hurt results. In Q3, revenue dropped 1% vs. the year-ago period. However, excluding currency, sales rose 6%.

If you run a five-year comparison screen between the stock price and the U.S. dollar index, they don't track. So currency is an influencing factor, not a determining factor.

The big plus for Tupperware's emerging market strategy is the potential for faster growth, though that hasn't shown up big-time yet.

Earnings grew 20% in both 2010 and 2011, but growth is expected to drop to 12% when 2012 results are announced before the open Jan. 29. The Street sees 11% EPS growth this year along with a revenue pop of almost 6%.

Other fundamentals look stronger. Pretax margin rose to 13.9% in 2011, the best in at least nine years.

Return on equity, a gauge of financial efficiency, hit 42% in 2011, well above the 17% level associated with top stocks.

The recent flap surroundingHerbalife ( HLF ) may have created an opportunity on the chart for Tupperware. A hedge fund manager slammed Herbalife's business model. Although no such questions surround Tupperware, the stock appeared to correct in sympathy.

The pullback stopped at the 50-day line, and the subsequent bounce put Tupperware in a buy zone. The stock also is back in a buy zone from a 63.69 buy point it cleared in November.