Investors looking for stable dividend stocks, should consider the consumer goods industry. As opposed to more volatile industries like technology or industrial manufacturing, the top consumer goods companies can keep earnings intact, in good economies and bad.
Consistent profitability helps them sustain their dividends, and grow them on a regular basis. We have compiled a list of five stocks, all in the consumer goods industry, which have announced 10%+ dividend increases so far in 2018. All five stocks on this list have impressive histories of dividend growth.
The first three stocks mentioned in this article are members of the Dividend Aristocrats, a group of 53 stocks in the S&P 500 Index, with 25+ years of consecutive dividend increases.
These stocks have many attractive qualities in common. They are all highly profitable, and generate impressive returns on capital. They also have pricing power. As a result, they can remain profitable enough to sustain their dividend growth each year moving forward.
With top brands in their respective industries, catalysts for future growth, and strong dividend raises each year, these five stocks should be on the radar for dividend growth investors.
Dividend Growth Stock #1: PepsiCo (PEP)
Food and beverage giant PepsiCo is a top choice for dividend growth investors. For example, on February 13th, PepsiCo raised its dividend by 15%, and also announced a new $15 billion share repurchase program.
With the dividend increase, PepsiCo has now raised its dividend payout for 46 consecutive years.
PepsiCo has a large portfolio, which is nearly evenly split between food and beverages.
Some of the company’s major brands include Pepsi and Mountain Dew sodas, as well as non-sparkling beverages like Pure Leaf, Tropicana, Gatorade, and bottled water. In addition to PepsiCo’s core beverage brands, it also has a large snacks business under the Frito-Lay brand. The company has also built a portfolio of healthier foods, including Quaker, Naked, and Sabra.
The food segment is the key area of growth for PepsiCo, led by its Frito-Lay segment.
Source: 2018 CAGNY Conference Presentation, page 3
PepsiCo performed well in 2017. In the fourth quarter, organic revenue increased 2% year over year. Food and snacks led the way for PepsiCo, with 2% volume growth, compared with a 2% decline for beverage volumes. Frito-Lay North America generated 3% volume growth, and 5% organic revenue growth in the fourth quarter.
For the full year, PepsiCo had adjusted earnings-per-share of $5.23, which increased 9% from 2016. Organic revenue increased 2.3% for the year. Thanks to the company’s strong brands and global reach, 2018 is expected to be another strong year.
Food and snacks will continue to be a major growth catalyst. The environment for soda is worsening—due to shifting consumer preferences, U.S. soda consumption has steadily declined for over a decade.
Fortunately, the snacks portfolio continues to grow at a high rate, and is taking market share.
Source: 2018 CAGNY Conference Presentation, page 6
PepsiCo has a particularly attractive growth opportunity in emerging markets like China, Africa, India, and Latin America. For example, in the fourth quarter, PepsiCo realized 6% organic revenue growth in the Europe/Sub-Saharan Africa region, and the Asia/Middle East/Africa region. Organic revenue also increased 3% in Latin America. These emerging economies helped offset the 3% organic revenue decline in North America.
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