These 3 Dividend Aristocrats Have Consumable Products as Part of Their Offerings
When we talk Dividend Aristocrats and Dividend Kings, it should come as little surprise the Kings and their more than 50 years of increasing dividends earns the same as a lot in the Dividend Aristocrats, given they easily satisfy the criteria that is increasing their dividends for at least 25 years. I last wrote about the Kings given the growing concern over the speed of the economy and prospects for 2019 earnings expectations to move lower for the back half of the year. This led me to suggest investors through the Kings for companies that have inelastic and defensible business models. That turned up shares of Proctor & Gamble (PG) , and a few others. Now let's do the same for the Dividend Aristocrats.
Out of the gate, we'll eliminate those overlapping Kings, which means passing over Proctor & Gamble and Coca-Cola (KO) to find Colgate Palmolive (CL) , Clorox (CLX) , Kimberly-Clark (KMB) and AT&T (T) . I've written more than enough on AT&T shares and the enviable dividend yield that is clocking in at 6.3% - if you haven't considered them, you should and in terms of disclosure, we own T shares in the Trifecta Portfolio.
All three of the remaining companies that are Colgate, Clorox and Kimberly-Clark each have consumable products as part of their offering stable. At Colgate its toothpaste, soaps for body, dishes and other cleaning as well as deodorants. While best known for namesake bleach product, Clorox has a number of other household cleaning products for disinfecting, inside and outside use, as well as for pets. At Kimberly-Clark, we find family and feminine care products ranging from toilet paper to tampons as well as paper towels and baby care products. Suffice it to say, people are still going to consume these kinds of products in a strong or weak economy. The frequency may vary some, but odds are no one is going to stop brushing their teeth, cleaning their house or using toilet paper.
Aside from being Aristocrats, the dividend yields on these stocks range from 2.4% (Colgate) to 3.0% (Kimberly-Clark), and in the last two quarters all three of them once again boosted their quarterly dividend. Check and check.
Given the current economic environment as well as market one, we want to examine these investment candidates to see how their earnings are likely to stack up in the back half of the year. As a reminder, current expectations have the S&P 500 growing its collective earnings roughly 10% in the back half of 2019 vs. the first half, but we've started to see those expectations come down.
None of the three inelastic Dividend Aristocrats that have made it through our screening process have EPS growth that bests that 10% level. Despite its array of products, Kimberly-Clark's earnings are expected to rise just under 2% in the second half of the year vs. the first half, while those at Clorox are expected to decline. Perhaps it's all that spring sports activity that leads to extra wash and stain fighting in the first half of the year. That leaves Colgate, which is slated to grow its earnings by more than 4% in the second half of the year.
If we hit a summer slump that persists into the fall, odds are all three of these Aristocrats will find investor love. However, if I had to narrow the playing field down to two of these three stocks, I'd favor Kimberly-Clark as at current levels its shares have the richest dividend yield and Colgate shares because they have faster growing EPS prospects. For those that may have already added shares of Proctor & Gamble to their holdings given the expectation for 20% EPS growth in the back half of the year, you may want to forego Colgate shares and focus on Kimberly-Clark.
At the time of publication, Chris Versace had no position in the securities mentioned.