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What are we looking for?

Sustainable dividends from baby-focused manufacturers.

The screen

Baby Archie Harrison Mountbatten-Windsor is set to spur sales of any onesie or stroller he’s photographed in. So far, Archie’s parents, Prince Harry and Meghan, Duchess of Sussex, have limited what may be seen as baby product endorsements to Archie’s blanket (which, incidentally, was handmade in Nottingham, England).

Certainly, famous people photographed with identifiable brands spur sales for the brand’s companies. Today’s search takes a broader view: It targets baby-merchandise makers with international operations plugged into the rapidly expanding, global middle class – and its buying power. All makers of baby merchandise should benefit from this growing market and the willingness of parents – and grandparents – to splurge.

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We’ve singled out dividend payers from a list of baby-product makers, with global reach and growth prospects. We then applied our TSI Dividend Sustainability Ratings, which award points based on these 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 sufficient to cover dividend payments;
  • One point if the company is a leader in its industry.

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. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated six stocks primed for growth. Those include three with Royal Warrants – “a mark of recognition” sanctioned by the Queen – Procter & Gamble Co. produces Pampers diapers; Unilever PLC makes Fissan baby shampoos; and Nestlé SA owns the Gerber baby-food brand. Other stocks on our list are Newell Brands Inc., maker of the popular Graco baby strollers (sorry, UPPAbaby Inc. is private); Canada’s Dorel Industries Inc., maker of Maxi-Cosi car seats; and Johnson & Johnson, which has produced baby shampoos and powders for more than 100 years.

Six baby-product stocks with sustainable dividends

Ranking*CompanyTickerDividend Sustainability RatingPointsMarket Cap ($Bil)**Recent Price ($)**Div. Yield (%)1Yr Total Return (%)
1Procter & Gamble Co.PG-NHighest10266.2106.512.846.3
2Unilever PLC (ADR)UL-NHighest1069.860.353.08.9
3Nestle S.A. (ADR)NSRGY-OTCHighest10295.997.901.627.9
4Johnson & JohnsonJNJ-NHighest10367.1136.912.69.4
5Newell Brands Inc.NWL-QAbove Average76.515.636.1-40.7
6Dorel Industries Inc.DII-B-TAverage60.411.1710.8-51.8

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

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

James Bates, CFA, is a senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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