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Buy this Cheap Consumer Staples Stock for its High Dividend Yield?

Benjamin Rains
·3 mins read

Newell Brands NWL is a consumer goods firm with a diverse portfolio. The stock had been trending pretty heavily in the wrong direction over the last several years. But it has shown signs of life during the coronavirus comeback.

What Went Wrong?

Newell’s vast portfolio includes Paper Mate, Coleman, Rubbermaid, Yankee Candle, and more. The current iteration of the company was formed after a merger between Newell Rubbermaid and Jarden Corporation back in 2016.

NWL’s sales have dropped in the last few years as it tries to navigate the quickly changing retail landscape that has Wall Street and shoppers increasingly focused on e-commerce. In today’s retail environment, upstart brands can find success on Amazon AMZN, Etsy ETSY, Instagram FB, and many other platforms.

Newell’s sales slipped 9% in 2018 and another 4.3% last year. To help try to turn the tide and improve Wall Street sentiment, Newell announced in March 2019 that its chief executive would step down amid its struggles and activist investor pressure. The consumer goods firm announced last July that Ravi Saligram would take over as CEO, effective in October 2019.

 

 

 

 

 

 

 

 

 

 

 

 

Other Fundamentals

NWL stock saw a nice three-month post-announcement boost in the fall of 2019. And the stock was performing reasonably well after its big surge until the coronavirus.

The stock is now up roughly 60% off the March lows to double the Consumer Staples market. Newell closed regular trading Thursday at $16.72 per share, which still gives it nearly 20% more room to run before it hits its 52-week highs of over $20 per share.

The company topped our Q2 estimates at the end of July. “Three of eight business units delivered core growth in the second quarter, eCommerce sales continued to accelerate and the company as a whole delivered modest core sales growth in the month of June,” Newell’s CEO said in prepared remarks.

Looking ahead, our Zacks estimates call for the company’s FY20 sales to jump nearly 2%, with FY21 projected to come in another 4.5% higher to reach $9.47 billion. On top of that, its earnings revisions have trended heavily upward since its last report to help Newell land a Zacks Rank #1 (Strong Buy) right now.

NWL also sports an “A” grade for Momentum in our Style Scores system and it is part of a highly-ranked Zacks industry. On top of that, Newell’s dividend yield comes in at 5.50% at the moment. This more than doubles the S&P 500’s average, looks great compared to the 30-year U.S. Treasury’s 1.43%, and tops peers such as KimberlyClark’s KMB 2.96%.

That said, Newell’s shares are still down 60% in the past three years, which helps boost its yield. And investors might want to be cautious about stocks like NWL in the current market environment. But it does certainly have some appeal at the moment.

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KimberlyClark Corporation (KMB) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Newell Brands Inc. (NWL) : Free Stock Analysis Report
 
Facebook, Inc. (FB) : Free Stock Analysis Report
 
Etsy, Inc. (ETSY) : Free Stock Analysis Report
 
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