In the first quarter, the 13.8% price gain for the S&P 500’s Consumer Defensive sector was second only to the 15.2% for the Health Care sector. While the fourth year of an economic recovery would usually see cyclical stocks leading the way, defensive wariness continues to linger, and consumer staples rich with dividend payers is quite the popular hunting ground. But popular comes at a price; the trailing 12-month PE ratio for this sector is 18.3.
Using YChart Stock Screener to drill down into the Consumer Defensive segment of the S&P 500, 11 companies have current yields of at least 2% and 5-year dividend growth rates at or better than the 9% average for the sector. Layer in the requirement for a below-average forward PE ratio and the list shrinks to six: Archer Daniels Midland (ADM), Coca-Cola (KO), Altria (MO), Molson Coors (TAP), Target (TGT) and Walgreen (WAG). Altria’s 5.1% current dividend yield is nearly double the next highest, Molson Coors’ 2.6% dividend yield.
Walgreen, featured in an earlier YCharts series on dividend growth, has one of the best records among S&P Dividend Aristocrats (companies that have lifted their payout annually for at least 25 years) for increasing its dividend.
Altria is also delivering on buybacks as well. Taking a look at net payout yield -- the combined value of dividends and buybacks -- raises Altria’s shareholder return to 6.3. Buybacks also help push Coca-Cola’s net payout yield to 3.6%, compared to 2.8% for its straight-up dividend yield.
Carla Fried, a senior contributing editor at ycharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money Magazine. She can be reached at firstname.lastname@example.org.
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