What are dividend growth company stocks
Consumer stocks: strong brands and dividend growth
If you're one of the more cautious stock investors, take a look at defensive consumer goods stocks.
These include many stocks that have the characteristics of good value stocks.
Simple business models with "deep moats"
Most of the good value companies have a simple - almost boring - business model; and are successful with it.
They often have a competitive advantage over their competitors - a “deep moat” surrounding the company - which secures the Group's market power over the long term.
Such an advantage can be permanent cost advantages. A classic example of this is Wal-Mart.
Due to its size and exclusive supply contracts, the company can put its goods on the shelf more cheaply than many of its competitors.
And thanks to its high level of awareness, Wal-Mart can afford to forego cost-intensive advertising as far as possible.
It's not size that matters, but steady dividend growth
Another characteristic of good value stocks is steadily rising dividends. When many investors use the term “dividend stock”, they think of a dividend yield of 5, 6, 7, or 8%.
But such dividend yields are often unsustainable and often a sign that the company has no productive uses for its profits and therefore prefers to distribute them.
Good dividend stocks, on the other hand, tend to have dividend yields of 2 to 4%. That doesn't sound like that much at first. But companies that are steadily increasing their dividends every year are more interesting.
This is a sign of disciplined management that believes in their company's long-term earnings growth.
This is also reflected in the share price, which rises over the long term, which is why the dividend yield rarely exceeds 5% despite constant increases.
A good example of this is Coca-Cola. The company has been steadily increasing its dividend for 50 years - even before Warren Buffet first bought the stock for Berkshire Hathaway.
"Boring" consumer goods with underestimated potential
Defensive consumer goods stocks usually lag a little behind the stock market in upswing phases.
On the other hand, the losses in downward movements are also significantly lower.
And in the long run, the supposedly boring consumer goods stocks beat most other industries.
If you want to cover the area of defensive consumer goods stocks as an addition to your portfolio, a broadly diversified investment via an ETF is worthwhile.
The above-mentioned value criteria apply to a large number of the companies in the LYXOR ETF S&P 500 Capped Consumer Staple Sector, for example.
Well-known brands such as Procter & Gamble, Coca-Cola, Philip Morris, Wal-Mart and PepsiCo are among the largest positions
These are companies with strong market power that have made their simple business models highly profitable over time.
The average dividend yield here has been around 3% for years, although the absolute size of the company's distributions has doubled within a few years.
Coca Cola: Brewing company rides the wave of health Coca Cola: Beverage giant presents strong figures. A shift in strategy to healthier drinks has a positive effect ›read more
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