Investing In Weight Management Dividend Stocks
There’s no question that the American waistline is expanding. In fact, more than one third of the U.S. population is now officially obese while the number of people classified as morbidly obese jumped more than 350% in the past three decades alone. With a growing number of the population facing these unhealthy numbers there is no shortage of weight-loss companies looking to profit from this calamity by offering weight management pharmaceuticals, nutritional supplements and other diet plans. In the U.S. alone the weight loss industry is worth more than $61 billion in annual sales.
Of course, as dividend income investors we are mostly interested in the companies in this sector that can pay us sustainable and increasing dividends year in and year out. With that being said, let’s take a look at some of the dividend paying stocks in the the weight management industry.
First up is GNC Holdings Inc. (GNC). GNC operates as a specialty retailer of health and wellness products via its network of approximately 8,500 worldwide retail locations and through various online outlets including GNC.com, LuckyVitamin.com, and DiscountSupplements.com. Besides for selling vitamins and other nutrition products GNC also retails many diet products and weight management supplements as well. GNC currently has a slim yield of 1.70% with a slender payout ratio of 22.5% base on current cash flow. From a valuation perspective GNC has a current PE of 13.60 which is well below the S&P and industry peers alike. Forward PE looks a little more enticing at 11.85.
Next on our list of companies in the weight management sector is Nu Skin Enterprises Inc. (NUS). NUS develops and distributes various products relating to skin care, personal care products, supplements as well as distributing the TR90 weight management and body shaping systems. Currently yielding a generous 3.10% yield with a moderately low payout ratio of 33.3% this stock definitely has room to increase its dividend going forward. A solid dividend payer having raised its dividend for the last thirteen years, NUS also has a very impressive ten year annualized dividend growth rate of 15.67%. That’s the type of dividend growth any dividend investor would love. From a valuation perspective, NUS has a very slim current PE of 8.63 putting it well below the S&P and industry peers like GNC above. Forward PE is slightly higher at 9.7.
Finally, our thinnest dividend paying company, based on market cap, in the weight management sector is Nutrisystem, Inc. (NTRI). A company that really needs no introduction as their television ads seem to persist on a never ending basis, NTRI provides weight loss programs for men and women by focusing on selling portion-controlled prepackaged food items based on low glycemic and other metabolism friendly indexes. Of the companies mentioned, NTRI offers a plump yield of 4.50% with an equally heavyset payout ratio of 111.1% based on current cash flow. Having a relatively short dividend paying history, NTRI does have a moderate five year annualized dividend growth rate of 5.92%. Nothing too large to get excited about from a growth perspective but at least you are receiving a generous current yield. On the valuation side of things, NTRI has a current high PE of 43.20 suggesting share price has really run ahead of current cash flow. Forward PE looks much more reasonable at only 20.05. This might be an interesting pick for a dividend portfolio looking to juice its current yield.
Though suspending its dividend in 2014 I wanted to simply give mention to one of the more controversial weight management companies to make headlines in recent years, Herbalife Ltd. (HLF). One of the larger companies in the space, HLF has been on a rocky and volatile ride during the past year and though sporting a low PE of 10.06 and seemingly more of a buy at current prices, I simply am not interested as it is no longer a dividend paying stock.
Clearly, despite being such a huge industry in the U.S., there aren’t may choices when looking to invest in the weight management space, from a dividend perspective at least. The companies mentioned do provide at least some entry into the space for those looking to buy income producing stocks. Do you have any exposure to the weight management sector in your portfolio? Please let me know below.
Disclosure: Long NONE