The past 12 months have been difficult for most businesses. Not only is the COVID-19 pandemic still with us, but inflation is soaring, biting into profits. Russia’s war against Ukraine further threatens the stability of an already shaky global economy. Given all of this, it’s no wonder most stocks have suffered so much this year.
However, not all actions have problems. A handful of dividend payers have not only managed to ignore the problems plaguing other names, but they may even thrive on the environment. Here’s a closer look at three of the best stocks in this bunch; it’s no surprise that they all strive to give consumers what they want and need.
Dividend yield: 2.2%
Bunge Limited (BG -2.93%) may not be a household name. Chances are, however, that you or someone in your household is a regular consumer of at least one of its products. The company grows a variety of food crops, ranging from soybeans to sugarcane to sunflower seeds, supporting the manufacture of canola, cooking oils, ground wheat, and more.
Food prices, of course, are skyrocketing. Don’t necessarily blame food companies like Bunge, though. They have been rising since the pandemic first disrupted supply chains. Then last year’s inflation spurt, triggered by a tsunami of cheap stimulus dollars, followed by Russia’s invasion of Ukraine, one of the world’s largest wheat producers, n only made things worse. Also keep in mind that as food prices rise, the food industry’s own costs, such as transportation and labor, are skyrocketing.
Still, Bunge’s newfound pricing power has arguably done it at least as much good as higher costs have hurt it. Last year’s 43% rise in sales was accompanied by a 20% increase in gross margin, pushing its adjusted earnings per share from $8.30 in 2020 to $12.93 in 2021.
This year’s projected earnings should be in line with analysts expecting 15.2% revenue to deliver net income of $12.33 per share, though things should stabilize from there in 2023. Even so, this dividend-paying food stock is not only serving up market-beating performance, but it’s also poised to hand out a record $2.40 per share dividend that is clearly affordable.
British American Tobacco
Dividend yield: 6.9%
So-called “vice stocks” are generally reliable choices, although they are rarely high-growth holdings. This is because vices like smoking, drinking, and gambling are, by definition, always in demand.
Walk in British American Tobacco (RTC 0.72%), which is up more than 20% in the last six months, while most other stocks are in the hole for this period. Why? For, knowing that smokers tend to continue smoking even in a lousy economic environment, investors have sought refuges like this.
The global smoking cessation movement is not working as well as one might expect. Based on the most recent data available, the World Health Organization estimates that the global number of regular smokers will only drop from 1.32 billion in 2015 to 1.27 billion by 2025. Meanwhile, thanks to rising prices, Imarc Group estimates that the global tobacco market will grow at an annualized rate of 1.5% per year until 2027.
This is good news for British American Tobacco, which manufactures and markets cigarettes under the Kent, Lucky Strike, Pall Mall and other brands in nearly 200 countries.
Although being UK-based means there is no need to offer full quarterly updates like US-based companies are, British American’s recently released half-yearly report confirms that the company’s revenue is on track to improve between 2% and 4% this fiscal year, after comparing stable revenues from last year. Earnings per share this year are also expected to rise about 10%, extending last year’s 6% rise. It’s not much, but it’s reliable.
That being said, British American Tobacco continues to adapt to a changing market that is increasingly tobacco-friendly. The company is also the name of Vuze vaping technology and the THP brand of tobacco heating products that do not create smoke. Revenues from these non-combustible products increased by around 30% last year and should continue to grow at a similar rate this year.
Packing Company of America
Dividend yield: 3.1%
Finally, add Packing Company of America (PKG -2.98%) to your list of stocks that have defied the odds by doing well lately and will likely continue to do well for the foreseeable future.
It’s not a terribly difficult set of dots to connect here. Consumers buy things in any economic environment. The only thing that changes is what they buy. People tend to spend more on prepackaged groceries when times are tough, for example, and are likely to buy more discretionary goods, such as electronics and household items, when the economy is doing well. . Packaging Corporation of America offers solutions for both markets, and dozens more. Signs, in-store displays, printed containers and bulk sale cartons are all in her wheelhouse.
This is one of the main reasons why this stock is up 15% year-to-date, although it’s not an undeserved gain. Last year’s revenue was 16% higher than 2020, and that growth continued in the first quarter of this year, with an 18% improvement. Earnings are also up, from $4.84 per share in 2020 to $8.83 in 2021, on their way to the $11.56 per share expected this year, according to analyst estimates.
And the company largely shares this growth with its shareholders. The newly increased quarterly dividend is 25% higher than the payouts it made last year. Look for the same as well, as the continued growth of e-commerce plays right into the hands of this company.