Sometimes the hidden gems in the stock market are the ones right in front of you.
These companies make products you simply can't live without. Their products likely fill your drawers and cupboards. Incredibly, one company has products in 93% of U.S. homes…
They're also some of the best dividend stocks you can buy today. One of those we'll show you today could soar nearly 300%…
Despite the importance of their products, some of the biggest brands in the world are being overlooked by investors. Many mistakenly believe you need to invest in flashy tech firms and trendier offerings to beat the markets.
You may already know that consumer staples are reliable picks in bear markets: It's the second-least volatile investment sector since 1962, according to Fidelity.
But you might not know that consumer staples have delivered the second-highest returns of any sector in that time. In other words, these stocks have lots of upside.
One reason these stalwarts have lost their shimmer on Wall Street comes from a misconception – one of many – about millennials. As Jack Hough of Barron's wrote in April, conventional wisdom says young people gravitate to small, independent brands, instead of the big-name brands that have been around for generations.
However, a survey conducted by Jefferies shows leading brands are not affected by this trend. To the extent that younger brands are gaining market share, they are doing so at the expense of lesser known brands – not the ones we'll show you today.
The old, reliable names are still the ones people need most. And because investors aren't paying attention, many of them are available at steep discounts. One pick we're about to show you could pop by as much as 280%.
We've got five dividend stocks for you today that are behind dozens of products you know and love.
All of them command dominant market shares in their segments.
They all deliver nice, big yields with low payout ratios.
And they're all undervalued by the market right now. So you can expect a nice pop in the near future.
Take a look and see why it's time to put your investment money where your shopping dollars go…
Dividend Stocks You Can't Live Without, No. 5: J.M. Smucker Co.
Everybody knows the ubiquitous Smucker's brand of fruit spreads. But the 121-year-old Ohio-based J.M. Smucker Co. (NYSE: SJM) is a food conglomerate worth over $12.5 billion. Brands include Jif; several Pillsbury baking products; store-bought coffee brands like Folger's, Dunkin Donuts, and Café Bustelo; and some of the top-selling pet foods in the world.
According to the company's latest annual report, a Smucker brand product can be found in 93% of U.S. households.
But that doesn't mean the company has hit a ceiling. Café Bustelo has grown at a 12% compound annual growth rate over the last five years. And Smucker's Uncrustables tops that at 17%.
In April, Smucker announced it would be boosting its pet food product lineup with the $1.7 billion acquisition of Ainsworth Pet Nutrition. That includes celebrity chef Rachael Ray's Nutrish line, one of the fastest-growing lines in the premium pet food category. Smucker expects the sale to generate an additional $800 million in sales in the first year, in addition to $55 million in company savings and a $200 million tax benefit.
SJM's dividend yield of 2.8% is roughly in-line with a 10-year U.S. Treasury note. That dividend has risen every year since 2002, and the company has managed to keep its payout ratio – a stock's dividend as a percentage of its earnings per share (EPS) – at just 27.54%. That means Smucker should have no problem boosting that dividend and continuing to grow earnings.
If SJM hits earnings estimates in its upcoming earnings call, it will have boosted EPS by 22% from the year before and overall by 53% over the last three years. Shares of SJM currently trade just below $113 each.
With J.M. Smucker, you get some of the most dependable food brands in the world and some of the fastest-growing brands, too.
Dividend Stocks You Can't Live Without, No. 4: Clorox Co.
When Barron's named Clorox Co. (NYSE: CLX) one of the most sustainable companies in the United States for 2018, staff writer Leslie P. Norton noted the irony that its signature product – bleach – is notoriously toxic.
But Clorox's lineup includes brands like BRITA water filters, Burt's Bees personal care products, Hidden Valley dressings, Kingsford charcoal, and Fresh Step cat litter.
Many of the products Clorox sells dominate their markets. Clorox Disinfecting Wipes and Toilet Bowl Cleaners lead their U.S. markets with 54% and 41% shares, respectively. Clorox Bleach dominates 60% of its market. BRITA filters command 54%. And Kingsford runs away with the charcoal market at a 74% share.
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No wonder Clorox is raking in profits at an impressive clip. With one quarter to go in FY2018, the company is expected to grow EPS by 15.7% for the year.
CLX just boosted its dividend by an impressive 14%, marking the 41st consecutive year of raises for this dividend aristocrat. And it still maintains a payout ratio of 54%.
But most impressive is its return on equity, a stunning 105.13% over the last 12 months. That's compared to an industry average of just 16.44%.
In spite of that, Clorox stock has slipped to about $117 from a 52-week-high of $150. Based on its market dominance, impressive dividend, and fantastic returns, it looks like Wall Street is severely undervaluing this gem. The time to buy is now.
About the Author
Stephen Mack has been writing about economics and finance since 2011. He contributed material for the best-selling books Aftershock and The Aftershock Investor. He lives in Baltimore, Maryland.