With baby DivHut turning one recently you could say that the month of March centered mostly around him as well as my personal one year anniversary of being a father. After one year of changing diapers, feedings and formula, among other things, I began to think about his portfolio as well as other baby-centric dividend stocks. After all, we’re all here to read about our own personal dividend exploits as well as share some potential dividend investing ideas. While feeding him one late night I thought about the various companies that produce baby formula and wondered if some could potentially belong in his own portfolio. With that being said, let’s take a look at some of the major baby formula producers that pay dividends.
First up, is dividend stalwart Abbott Laboratories (ABT). A name that really needs no introduction to most dividend investors but has been a steady supplier of Similac formula for my baby for the past year. Currently yielding a decent 2.59% with a moderate payout ratio of 48.4% this company has been raising dividends for over four decades putting it in elite status among most dividend paying companies. Based on current cash flow the dividend appears to be very safe with room for future growth. The ten year annualized dividend growth rate for ABT is a decent 6.31%. From a simple PE perspective, ABT has a multiple of 23.2 with its five year average PE sitting at just 21.1. Forward PE looks more enticing at just 16.5. ABT is another four star rated stock from Morningstar.
Next on our formula producing quest is Mead Johnson Nutrition Company (MJN). A company with a history that goes back well over 100 years, like ABT, this maker of infant formulas and children’s nutrition products is best known for its Enfamil line. With a current yield of 1.99% with a moderate payout ratio of 47.3%, MJN like ABT, sports a safe dividend based on current cash flow with room for future growth. Speaking of dividend growth, MJN has been increasing its dividend for six years with an impressive five year annualized dividend growth rate of 12.90%. From a basic valuation perspective MJN sports a current PE of 25.6 which is slightly lower than its five year average of 27.2. Forward PE looks slightly better at 21.6.
Another name producing baby formula among many other products is Perrigo Company Public Limited Company (PRGO). Founded in 1887 and headquartered in Dublin, Ireland, PRGO produces all the store brand pharmaceutical, nutritional and other healthcare products carrying the brand of the specific retailer selling the product. Whether it’s a WalMart, Walgreens, Kroger, or some other store, PRGO manufactures the store brand alternative to the national brands. With that being said, PRGO has a complete line of infant formulas that compare to the national brands mentioned above and is carried in 40,000 store locations. The stock offers a tiny current yield of just 0.44% and a trailing twelve month payout ratio of 47.5%. While offering a stingy current yield, PRGO has a pretty impressive ten year annualized dividend growth rate of 11.86%. Looking at its PE the stock sports a multiple of 131.8 well above its five year average of 56.3. Forward PE comes back down to earth at 12.4.
Finally, we have a giant in the baby formula/food space with a product that is equally as known. That company, Nestlé S.A. (NSRGY) and the baby product, Gerber. Both well known names and brands that essentially cover the globe with its products. NSRGY gives investors a decent yield of 3.10% with a trailing twelve month payout ratio of 47.4%. The ten year annualized dividend growth rate of NSRGY is an impressive 13.21%. The current PE of 16.1 is well below its five year average PE of 19.3.
Of course, the companies profiled offer many diverse products besides baby formula and are well globalized. Are any of these famous baby formula producers in your portfolio? What have you been feeding your offspring? Similac? Enfamil? Store brand? Gerber? Please let me know below.
Disclosure: Long ABT