If there is one image that is synonymous with a recession, it is the lines of people outside major soup kitchens within cities across the world. When the poor are hungry, the most basic foodstuff is soup, and it follows that if you are looking for a defensive company to consider for volatile markets, then a soup producer could be just what the doctor ordered - especially if the soup is laced with dividends.
For that reason, investors might want to take a closer look at Campbell Soup Company (CPB) which trades on a dividend yield of 2.9% and a 16 times historical price to earnings multiple.
Founded in 1869, Campbell (CPB) has a portfolio of market-leading brands, including "Campbell's Soup," "Pepperidge Farm," "Arnott's" and "V8". It is a member of the Standard & Poors 500 and the Dow Jones Sustainability Indices.
While 2.9% may not be considered the most spectacular yield relative to some of the stocks mentioned on this site, one should note that since 1985 the company has paid a dividend every single year.
When the company reported third quarter results in May, the strength of the brands became obvious. Sales increased 7% to $1.8 billion while gross margin was up to 41.2%, compared with 40.6% a year ago. Cash flow from operations for the nine months of the trading year is at $859 million compared with $806m compared to the same period last year, which is a 6.5% increase.
The company delivered another quarter of strong adjusted earnings growth, driven by an improvement in volume trends, coupled with continued gains from productivity and favorable currency. The U.S. beverages and sauces businesses had an outstanding quarter with strong top- and bottom-line performance, led by 'V8 V-Fusion' juices and 'Prego' and 'Pace' sauces.
The U.S. soup business also delivered strong volume gains, particularly in ready-to-serve soups, driven largely by promotions. The company said in the quarterly report that they expect adjusted net earnings per share growth to be at the high end of their range.
For the year-to-date, Campbell (CPB) has repurchased 9 million shares for $315 million (an average price of $35) under its share repurchase program indicating that management sees value in the stock.
Over the past four years, dividends have increased by about 38%. With an extremely defensive product offering, capable management and a decent, sustainable dividend yield, Campbell Soup (CPB) might be just the right tonic for volatile markets.
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