Dividend growth investors have different approaches to stock picking, but I think there are some important factors that every investor looks at. As far as I am concerned, I think a good dividend growth pick has to show some simple characteristics.
The first is a stable and solid business with low volatility in top line and margins. The second factor is a low payout ratio and a commitment to increase dividends, typically shown by at least 5-10 consecutive years of dividend raises.
The third factor is a competitive advantage that should guarantee future stability for the company’s business. It’s obvious that an analysis based on these simple factors must be completed by an accurate analysis of the company’s financial condition and every position should be started only if valuation gives the prospects of decent returns.
On the basis of these initial factors, I am going to list and briefly discuss four dividend growth stocks in consumer-related industries that I think are worthy of consideration. All these companies have a stable business, a healthy balance sheet, some competitive advantages that help their business and trade at good or acceptable valuations.
Starbucks -- Yield: 1.72%
Starbucks (NASDAQ:SBUX) employs 254,000 people, generates revenue of $21,315.90 million and has a net income of $2,818.90 million. The current market capitalization stands at $83.74 billion.Starbucks’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $4,883.80 million. The EBITDA margin is 22.91% (the operating margin is 19.57% and the net profit margin 13.22%).
Financials: The total debt represents 25.05% of Starbucks assets and the total debt in relation to the equity amounts to 60.93%. Due to the financial situation, a return on equity of 48.16% was realized by Starbucks.
Twelve trailing months earnings per share reached a value of $2.01. Last fiscal year, Starbucks paid $0.80 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 28.89, the P/S ratio is 3.94 and the P/B ratio is finally 14.41. The dividend yield amounts to 1.72%.
Walt Disney -- Yield: 1.51%
Walt Disney (NYSE:DIS) employs 195,000 people, generates revenue of $55,632.00 million and has a net income of $9,790.00 million. The current market capitalization stands at $161.64 billion.Walt Disney’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $16,885.00 million. The EBITDA margin is 30.35% (the operating margin is 25.53% and the net profit margin 17.60%).
Financials: The total debt represents 21.92% of Walt Disney assets and the total debt in relation to the equity amounts to 46.62%. Due to the financial situation, a return on equity of 21.39% was realized by Walt Disney.
Twelve trailing months earnings per share reached a value of $5.74. Last fiscal year, Walt Disney paid $1.42 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 18.01, the P/S ratio is 2.91 and the P/B ratio is finally 3.82. The dividend yield amounts to 1.51%.
Dollar General -- Yield: 1.48%
Dollar General (NYSE:DG) employs 121,000 people, generates revenue of $21,986.60 million and has a net income of $1,251.13 million. The current market capitalization stands at $19.31 billion.Dollar General’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $2,449.68 million. The EBITDA margin is 11.14% (the operating margin is 9.39% and the net profit margin 5.69%).
Financials: The total debt represents 27.51% of Dollar General assets and the total debt in relation to the equity amounts to 59.40%. Due to the financial situation, a return on equity of 23.20% was realized by Dollar General.
Twelve trailing months earnings per share reached a value of $4.43. Last fiscal year, Dollar General paid $1.00 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 15.86, the P/S ratio is 0.88 and the P/B ratio is finally 3.58. The dividend yield amounts to 1.48%.
Nike Inc -- Yield: 1.24%
Nike Inc (NYSE:NKE) employs 70,700 people, generates revenue of $34,350.00 million and has a net income of $4,240.00 million. The current market capitalization stands at $97.30 billion.Nike Inc’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $4,749.00 million. The EBITDA margin is 13.83% (the operating margin is 13.83% and the net profit margin 12.34%).
Financials: The total debt represents 16.35% of Nike Inc assets and the total debt in relation to the equity amounts to 30.64%. Due to the financial situation, a return on equity of 34.38% was realized by Nike Inc.
Twelve trailing months earnings per share reached a value of $2.51. Last fiscal year, Nike Inc paid $0.68 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 23.14, the P/S ratio is 2.79 and the P/B ratio is finally 7.72. The dividend yield amounts to 1.24%.
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