For all the tariff-slinging and market uncertainty, most folks don't really want to be invested in consumer goods right now. They'd rather throw in with the tech bubble FANGs and hope for the best.
Please, don't make that mistake.
There's one grocery store stalwart that I think you'll be much happier to have in your portfolio come Christmas.
Not only is it in its 94th consecutive year of paying a nice (and sustainable) dividend…
But it has outperformed BOTH Alphabet Inc. (NYSE: GOOG) and Facebook Inc. (Nasdaq: FB) this year.
And there's much more ahead.
Here's the four reasons McCormick & Co. Inc. (NYSE: MKC) is a buy.
1. It Has the Margin to Outperform in a Late Bull Market
As profit growth slows, a sign the economy is reaching the later stages of its cycle, the key to finding stocks that will outperform the broader market is to look for companies with stable and high gross profit margins. That’s the advice of a recent report from Goldman Sachs, in which a basket of 33 Russell 1000 stocks were presented as having five-year average gross margins of at least 35%. McCormick clocks in at a 5-year average gross margin of 41%. Source: Investopedia
2. It's Riding High on Smart M&A
McCormick has been strategically increasing its presence through acquisitions, in order to grow its spices and seasonings portfolio. McCormick’s acquisition of the food division of RB Foods, a British consumer products company, in August 2017, is the largest deal for the company till date. With iconic brands like Frank's RedHot Hot Sauce and French's Mustard, French's Crispy Vegetables and Cattlemen's BBQ Sauce, RB Foods is likely to continue being an asset for McCormick’s spices portfolio. Encouragingly, the acquisition of Frank’s and French’s brands drove McCormick’s sales by 13% in the second quarter, with gains from the buyout witnessed at both segments. Evidently, Frank’s and French’s brands boosted consumer and flavor solutions segments’ sales by 14% and 12%, respectively. Also, additional sales from these acquired brands are expected to boost the top line by 8% in fiscal 2018.
Source: Zacks
4. It's On Year 94 of Dividends
McCormick pays a $0.52 dividend, or 1.80% yield, which beats the 1.75% average yield for the Consumer Goods sector. This is the 94th year of consecutive dividend payments. With crazy strong cash flow, $202.6 million on hand (as of May 31, 2018), and a payout ratio of just 41%, this is as solid as they come.
