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What are we looking for?

Sustainable dividends from leading consumer brands able to raise prices – and revenue – to counter inflation.

The screen

PepsiCo Inc.’s announcement this week of strong sales growth in the most recent quarter speaks to the ability of top consumer brands to lift their revenue even as they raise their prices to offset inflation.

We still think the best strategy for investors concerned about inflation is to buy dividend stocks that will do just fine even if inflation returns to normal. At the same time, it’s worth noting that companies with strong household brands are particularly well-placed to thrive in inflationary times.

That resilience reflects steady demand for top brands even as their makers lift prices to pass along their higher costs to customers.

We started this search with an extensive list of dividend-paying U.S. and Canadian companies, before singling out those with strong revenue gains on high pricing as well as solid prospects for their leading brands. Our system awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Bil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1General Mills Inc.GIS-NHighest102.845.924.577.36
2Mondelez Int'l Inc.MDLZ-QAbove Average92.777.1-4.856.83
3Saputo Inc.SAP-TAbove Average92.312.70.231.46
4Maple Leaf Foods Inc.MFI-TAbove Average83.92.5-24.420.37
5Conagra Brands Inc.CAG-NAbove Average83.916.20.533.58
6McCormick & Co. Inc.MKC-NAbove Average82.020.3-4.674.48
7PepsiCo Inc.PEP-Q Above Average72.7224.47.9169.39
8Lamb Weston Hldgs.LW-NAverage61.211.750.482.88

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency.

Our TSI Dividend Sustainability Rating System generated eight stocks: General Mills Inc., headquartered in Minneapolis, Minn., has popular brands including Cheerios, Yoplait, Haagen-Dazs and Progresso. Chicago-based Mondelez International Inc. (formerly Kraft Foods) is a world leader in chocolate, biscuits, gum, candy, coffee and more. Montreal’s Saputo Inc. is a top global dairy producer and Maple Leaf Foods Inc., headquartered in Mississauga, sells fresh and prepared meats under Maple Leaf, Schneiders and other labels. Chicago-based Conagra Brands Inc. makes a variety of popular foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Orville Redenbacher popcorn and Reddi-wip whipped cream. McCormick & Co. Inc., headquartered in Baltimore, is a leading manufacturer, marketer and distributor of spices, seasonings, flavourings, mixes and condiments. Purchase, N.Y.-based PepsiCo is the world’s second-largest soft-drink maker after Coca-Cola Co. Its other brands include Frito-Lay snack foods, Gatorade sports drinks and Quaker Oats cereals. And finally, Lamb Weston Holdings Inc., based in Idaho, is a big French fries seller to restaurants, cafeterias and other businesses.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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