In times of market uncertainty, many investors look to hedge their portfolios by investing in stocks that pay dividends while prices are down. While there is always a risk of the dividend being cut, historically, dividend-paying companies have been found to be less erratic in choppy market conditions and continue to provide a better overall return compared to stocks that do not distribute dividends.
Among the most revered of dividend-paying companies are the Dividend Aristocrats, which have recorded at least 25 years of dividend growth. Some have even achieved the hallowed status of Dividend King, recording a minimum of 50 years of growth.
According to GuruFocus’ Dividend Aristocrats screener, a Premium feature, there are a number of companies that have long and consistent histories of paying dividends. Of the 65 total companies that have earned the distinction, 14 represent the consumer defensive sector. Companies in this space typically perform well regardless of market conditions due to providing products that are deemed necessities.
Some of these consumer defensive companies also have high guru ownership based on second-quarter 13F filings, including PepsiCo Inc. (PEP, Financial), Colgate-Palmolive Co. (CL, Financial), Procter & Gamble Co. (PG, Financial), Coca-Cola Co. (KO, Financial) and Target Corp. (TGT, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
PepsiCo
Offering a 2.74% dividend yield and a payout ratio of 0.83, PepsiCo (PEP, Financial) is held by 26 gurus. The company has increased its dividend for 50 years.
The Purchase, New York-based company, which is known for its namesake soft drink and a large portfolio of other beverages and snacks, has a $243.58 billion market cap; its shares were trading around $178.22 on Tuesday with a price-earnings ratio of 31.21, a price-book ratio of 13.87 and a price-sales ratio of 2.70.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 86 out of 100, the GF Score indicates the company has good outperformance potential. While it received high ratings for profitability, growth and momentum, the financial strength and value ranks are more moderate.
Of the gurus invested in PepsiCo, Ken Fisher (Trades, Portfolio) has the largest stake with 0.32% of its outstanding shares. The stock is also being held by Diamond Hill Capital (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Yacktman Asset Management (Trades, Portfolio) and many others.
Colgate-Palmolive
Sporting a 2.65% dividend yield and a payout ratio of 1.06, Colgate-Palmolive (CL, Financial) is held by 20 gurus. The company has boosted its distribution for 59 years.
The consumer good manufacturer headquartered in New York, which produces household, health care, personal care and veterinary products, has a market cap of $59.69 billion; its shares traded around $73.19 on Tuesday with a price-earnings ratio of 40.66 and a price-sales ratio of 3.23.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 79 implies the company is likely to have average performance going forward on the back of high profitability and value ratings and more moderate ranks for growth, financial strength and momentum.
With a 1.34% stake, First Eagle Investment (Trades, Portfolio) is Colgate-Palmolive’s largest guru shareholder. Other notable guru investors include Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Dalio’s firm, Yacktman Asset Management (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio) and the T Rowe Price Equity Income Fund (Trades, Portfolio).
Procter & Gamble
With a dividend yield of 2.46% and a payout ratio of 0.62, 24 gurus have positions in Procter & Gamble (PG, Financial). The company has increased its payment for 66 years.
The Cincinnati-based company, which manufactures a variety of consumer goods, including Pampers diapers, Oral-B toothbrushes and Gillette razors, has a $356.99 billion market cap; its shares were trading around $153.34 on Tuesday with a price-earnings ratio of 25.99, a price-book ratio of 7.88 and a price-sales ratio of 4.68.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 86 means the company has good outperformance potential, driven by high ratings for profitability, growth, momentum and financial strength as well as a more moderate value rank.
Fisher is Procter & Gamble’s largest guru shareholder with a 0.21% stake. The stock is also being held by Dalio’s firm, Yacktman Asset Management (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and many other gurus.
Coca-Cola
Generating a 3.15% dividend yield and a payout ratio of 0.75, 21 gurus own Coca-Cola (KO, Financial). The company has added to its dividend for 60 years.
The maker of the popular soft drink, which is headquartered in Atlanta, has a market cap of $251.01 billion; its shares traded around $58.27 on Tuesday with a price-earnings ratio of 23.98, a price-book ratio of 9.68 and a price-sales ratio of 5.65.
The GF Value Line suggests the stock is modestly undervalued currently.
Supported by high ratings for profitability and momentum, the GF Score of 81 indicates the company has good outperformance potential. Its ranks for value, financial strength and growth, however, are more moderate.
Holding a 9.25% stake, Warren Buffett (Trades, Portfolio) is Coca-Cola’s largest guru shareholder. Other major investors include Dalio’s firm, Jeremy Grantham (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), the Scotia Canadian Dividend Fund (Trades, Portfolio) and Simons’ firm.
Target
Yielding 3.62% and with a 0.59 payout ratio, Target (TGT, Financial) is held by 17 gurus. For the past 51 years, the company has increased its dividend.
The Minneapolis-based retail company has a $55.72 billion market cap; its shares were trading around $120.42 on Tuesday with a price-earnings ratio of 16.53, a price-book ratio of 4.63 and a price-sales ratio of 0.51.
According to the GF Value Line, the stock is significantly undervalued currently.
The GF Score of 86 implies the company has good outperformance potential on the back of high ratings for three of the criteria and more moderate financial strength and momentum ranks.
Fisher has the largest stake in Target with 0.45% of its outstanding shares. The stock is also being held by Diamond Hill, the Smead Value Fund (Trades, Portfolio), the Parnassus Value Equity Fund (Trades, Portfolio), Dalio’s firm and many others.
Other popular picks
Additional companies in the consumer defensive space that are popular with gurus include Walmart Inc. (WMT, Financial), Kimberly-Clark Corp. (KMB, Financial), Archer-Daniels-Midland Co. (ADM, Financial), Sysco Corp. (SYY, Financial) and Church & Dwight Co. Inc. (CHD, Financial).
