7. Kimberly-Clark: Consumer Products
Kimberly-Clark Corp. (NYSE: KMB) has been restructuring but remains a top defensive stock and consumer products leader. It dates back into the 1800s and now is worth $45 billion, and it comes with almost a 3% dividend yield. Its products include paper towels, tissues, diapers and sanitizers, among many other aspects of consumer products.
The rivalry of in-store promotions, generic brands and a weak international market (that darned pesky strong U.S. dollar) are all real, yet Kimberly-Clark keeps delivering dividend growth. Investors have to pay a premium price (about 20 times earnings), but that is now normal for large consumer products players, and it was an issue back in 2010 as well.
Kimberly-Clark shares were trading at $126.13, with a consensus price target of $136.83 and a 52-week range of $103.04 to $138.76. Also of Interest on Kimberly-Clark:
Alternative Pick: Procter & Gamble Co. (NYSE: PG) has been paring down its portfolio and jettisoned Duracell to Buffett’s Berkshire Hathaway. The company is a mega-cap at $220 billion in market value, and it is even more pricey at 22 times earnings, but with a 3.3% yield.
8. Republic Services: Waste Management
Republic Services Inc. (NYSE: RSG) still holds close to a duopoly position in large public garbage collection operations. The waste management business is highly regulated, but it can be very profitable, as we all hate garbage but keep making more and more of it. There are regulatory, environmental and pricing risks. Still, the company can win from lower gasoline and diesel costs, even if its recycling efforts are not profitable with commodity prices and demand low.
Having long-term contracts is a boom here and may offset environmental remediation costs, which go back many years (or decades). Republic was worth closer to $11 billion in 2010, and that is over $16 billion in 2016. Bill Gates’s Cascade Investment arm owns just over 30% of Republic now, with Gates likely viewing Republic as a futurist with a protected market. Its dividend yield is about 2.5%.
Republic Services shares were trading at $47.14, within a 52-week range of $38.99 to $48.76. The consensus price target is $51.50.
Alternative Pick: Waste Management Inc. (NYSE: WM) is a rival, with both companies valued at close to 20 times blended forward earnings. Its yield is a tad better at 2.8% than Republic’s, and in some ways Waste Management may look slightly more attractive than Republic. Over the past five years, Republic’s stock has risen almost 50%, versus just over 50% for Waste Management. Does anyone know how to out-guess the odds of a coin toss here? Also of interest in waste management, two in one:
- Why did Buffett sell out?
9. Teva Pharma: Generic Drugs Galore!
Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) has been another laggard in the group versus the market since 2010, but what Teva has going for it on top of a branded portfolio is being the world’s most dominant player in generic drugs. A pending acquisition should help out as well, assuming Teva’s deal reaction recovers in the wake of pricing concerns.
Teva has doubled its dividend in the past five years. It is also valued at about 10 times earnings. The 2016 election rhetoric around drug prices remains a risk, but this has happened before, and generic drugs are only going to see their shares of all drug prescriptions rise through time. Saving money in drugs at a time when health care costs are rising is a must.