Once you have invested and built up a nice nest egg, attention turns from growth to stability. It’s nice to have some nice little growth stocks that can grow 1000% over then next several years, but having a portfolio full of them can mean quite a wild ride. Looking at the January 25th edition of Value Line, which included the Food Processing Industry, presents some nice picks to add stability to a portfolio.
Once of the standouts was McCormick & Company. You know, the company that probably has a row of spices in your supermarket? Selling parsley and basil may not seem as exciting as creating the next social networking site, but there are a lot of people who buy spices regularly. Earnings have been growing at a respectable rate of about 10% per year, and the stock has been on a slow and steady uptrend since 2009. With a 2.1% dividend, and a dividend growth rate in the 10% range, this might be a nice stock to balance out a set of growth stocks in a portfolio.
Another stock in the same group is Nestle SA. This stock trades as an ADR (American Depository Receipt, which trades like a stock on the US exchanges and tracks the value of the European company). Nestle makes more than just hot chocolate. They make Gerber baby food, Poland Spring bottled water, Nescafe coffee, Dreyer’s Ice Cream, and Stouffer’s frozen meals. Even if there is a slowdown in the economy, expect consumers to keep buying these old favorites. The ADR pays a 3.3% dividend which is also growing in the 10% range.
Finally, Tootsie Roll company makes virtually every well-known candy on the market, including all of the Tootsie products, Andes Candies, Double Bubba Bubblegum, and even Junior Mints. The price of the stock is as flat as a board, but it pays a 1.2% dividend and its earnings are expected to grow by about 10% per year after declining over the last several years, so it may be due for an uptick. Even in a recession, you would expect people to keep buying their old favorite candies.
None of these stocks can be expected to suddenly shoot to the sky – the rate of earnings growth is too slow and they already have such a large market it is difficult for them to grow further. Still, they are steady producers that provide a nice dividend at a time when banks are paying nothing. One can also expect the value of their product lines to grow with inflation, so owning shares fo the companies is a good inflation hedge. These may be worth a second look as an addition to a large portfolio.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.