Investors who favor higher growth companies can often find good choices in the mid cap space. Businesses in this market cap range tend to be less mature and have greater growth prospects.
Investors who like a reliable, growing income stream seek out stocks that have a track record of raising their dividend payments year after year. These companies are labeled as ‘dividend aristocrats’.
When these two investment styles are combined, some say you get the best of both worlds. Solid growth prospects and increasing shareholder rewards.
Up about 10% this year, the mid-cap dividend aristocrats group has underperformed the S&P 500 which is up 16%. But with bond yields unattractive and many large-cap valuations stretched, some investors are looking at mid-cap dividend growers as a place to find undervalued growth and income plays. Let’s look at three of the best candidates.
What is Nu Skin Enterprises’ Dividend Yield?
Nu Skin Enterprises (NYSE: NUS) sells an assortment of premium beauty and personal care items under its namesake brand as well as nutritional products under the Pharmanex brand. As such, it has exposure to two of the biggest trends in consumer shopping—beautification and wellness.
In recent months, Nu Skin’s share price hasn’t been well. The company is facing higher selling expenses tied to its unique direct sales model. This along with delta-related government restrictions and intensifying competition (especially online) caused management to reduce its guidance for the current quarter.
The good news is the once $140 stock is having a 33% off sale after sliding $20 from its recent $60 peak. And with the holiday quarter still ahead, historically Nu Skin’s best, things are likely to get better heading into the new year. Investments in social commerce and digital capabilities are expected to lead to better customer acquisitions rates and financial results. Mid-single digit earnings growth is forecasted for next year, but this could be conservative given the potential of digital growth and new product launches.
Nu Skin has increased its dividend for 20 consecutive years. It offers a 3.8% dividend yield which is twice the average of the consumer staples sector. Toss in an active share repurchase program and a 9x forward P/E ratio and Nu Skin is looking like a beautiful growth and income play.
Is RPM International Stock a Good Housing Market Play?
RPM International (NYSE: RPM) makes a range of high-performance coatings, sealants, and chemicals that are sold to construction companies, manufacturers, and DIY consumers. The company’s recently completed fiscal year showcased 36% profit growth thanks to a broad-based rebound in demand from its diverse end markets.
The stock price has come down in recent months due to input cost inflation and the impact of adverse weather on construction activity. Both are likely to be temporary headwinds setting up long-term investors for a more favorable entry point for this perennial dividend grower.
RPM International has hiked its dividend in each of the last 20 years. It has a sub-40% dividend payout ratio which leaves the door open for plenty more years of dividend increases. The 2% yield isn’t earth-shattering but combined with a growing global customer base that spans more than 150 countries the growth-income formula is well-mixed.
Is Flowers Foods a Good Defensive Income Stock?
Investors looking for a defensive consumer stock that comes with a healthy portion of income should consider Flowers Foods (NYSE: FLO). The packaged bakery goods maker of Wonder bread, Nature’s Own, and Tastycakes currently offers a sweet dividend yield of 3.3%. Most of its profits are returned to shareholders in the form of dividends and the quarterly stipend has been raised for 8 years straight.
What you won’t get with Flowers Foods is high growth. Save the pandemic-driven 2020 when consumer stockpiling drove 37% profit growth, the company typically serves up low single-digit growth. But when it comes to a non-cyclical business whose products are in constant demand, Flowers Foods is a great way to make a portfolio more defensive.
Flowers Foods’ biggest customer is Walmart and its warehouse counterpart Sam’s Club. With more than 20% of revenue derived from Walmart, there is an inherent risk that losing its top customer could drastically drag down performance. This isn’t likely to happen anytime soon though just as consumers aren’t likely to lose their taste for the company’s popular lineup of breads, rolls, and snacks.
Investing in Flowers Foods is like buying a higher-yielding corporate bond with a side of growth. It won’t make you rich, but it will help put food on the table.
Before you consider Nu Skin Enterprises, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Nu Skin Enterprises wasn't on the list.
While Nu Skin Enterprises currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.
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