Here we highlight three stocks that offer a steady dividend and some peace of mind as the economic recovery unfolds. They aren’t likely to make you rich anytime soon, but they will make for some more restful nights ahead
Is Coca-Cola Still a Buy-and-Hold Stock?
If Coca-Cola (NYSE:KO) is a refreshing investment for value legend Warren Buffet, it should be good enough for the rest of us. Regardless of the economic backdrop, there will always be consumer demand for sodas, juices, teas, and other beverages.
With this said, restrictions on large gatherings during the pandemic have impacted Coke’s recent financial performances and brought more volatility than usual to the stock. However, with the worst likely over, the company appears to be on the path back to more normalized sales patterns. As family picnics and outdoor concerts gradually return along with restaurant traffic, Coke should start to see higher volumes based on group size rather than stockpiling.
Despite recording 11% lower revenue in 2020, Coke kept its dividend hike streak going serving up a $1.64 payout to loyal shareholders. The 2.4% dividend increase made it 59 straight years of higher dividends.
In the near-term Coke is a conservative way to play the economic reopening theme. Its beverage portfolio is more in tune with health and wellness trends with brands like Vitaminwater, PowerAde, and Minute Maid. As activities like youth sports and amusement park attendance normalize, Coke’s performance should improve.
Longer-term Coke’s rising dividend and defensive nature make it the classic buy and hold stock. So, investors can simply opt to have what Warren’s drinking.
What is a Good Non-Cyclical Dividend Stock?
Speaking of defensive stocks, Unilever (NYSE:UL) is about as non-cyclical as its gets. The U.K.-based consumer products giant is the company behind many of our favorite personal care and food items. Dove soap, Axe body spray, Q-tips, and Vaseline are all Unilever brands. So too are popular indulgences like Ben & Jerry’s ice cream, Lipton iced teas (and soups), Hellmann’s mayonnaise, and even the beloved Popsicle brand.
Although the elevated demand for Unilever’s food products has waned in recent quarters, it’s pretty much a sure bet that people will still be scooping up their go-to items as shopping patterns normalize. And as usual, this should lead to some solid profits for Unilever and sizeable dividends for shareholders.
Unilever has one of the strongest balance sheets in its peer group that supports an ability to pursue growth opportunities such as product expansion and establishing a greater presence in developing markets. The ADR currently has a 3.4% trailing dividend yield which about twice the average dividend yield of the consumer staples sector. This is an easy stock to throw in the cart as a core long-term holding.
Is it a Good Time to Buy 3M Stock?
3M (NYSE:MMM) has been one of the least volatile U.S. large cap stocks over the last ten years. Although it’s not a consumer defensive company, it’s highly diversified end markets generate some reliable financial results. With broad exposure to the automotive, aerospace, transportation, electronics, and health care industries as well as the consumer space, a downturn in one segment can be easily offset by strength in another.
The company has had some choppy performances in recent quarters. Some of it has related to the pandemic and some has not. Demand for home improvement, cleaning, food safety, and personal safety products has been strong. On the other hand, COVID-19 restrictions have forced the automotive, industrial, office supplies, and oral care businesses to re-evaluate how to adjust to the post pandemic economy.
Fresh off a corporate restructuring, though, 3M looks to be in a good position to capitalize on improving conditions in its key markets and achieve its earnings growth goal. Management is aiming to reduce annual operating expenses by at least $250 million. Based on the initial progress, this looks feasible and should drive higher margins and steady single digit growth over the long-term.
3M consistently rakes in some $30 billion in revenue each year and even in slow or no growth years it rewards shareholders with a higher dividend. In fact, 3M has gone toe to toe with Coca-Cola in raising its annual dividend in each of the last 59 years. The Dow Jones index mainstay has a 3.1% dividend yield and at 23x earnings is trading at the lower end of its historical valuation range. It deserves to be a mainstay in any long-term investment portfolio.
In this video, I’m going over 5 top dividend stocks to buy now that pay up to 8.5% dividend yield! I am a big fan of dividend investing for passive income – some of these stocks are a litter riskier, and some are definitely on the safer side.
While the start of vaccine rollouts offer hope that the worst of the pandemic may be over, its devastating financial impact for many will be felt for a long time to come. In research spanning 18 countries from the Deloitte Consumer Industry Center, we find evidence of continued household financial distress.[i] One in five consumers are spending more than they take in as income. During the course of the pandemic, they are twice as likely to have had their financial situation change for the worse and to indicate that they have cut back on staples like groceries and household goods.
That can lead to tough choices like dipping into savings, increasing the use of debt or prioritizing which upcoming payments will be missed. Even larger numbers of consumers are worried about this becoming their fate. Forty percent of all consumers in our study are worried about the amount of their savings and credit card balances.
Since the 2008 Great Recession the divide between more affluent consumers and lower income consumers has grown.[i] Just as the pandemic accelerated the adoption of contactless commerce, video conferencing and home gyms, it also accelerated this bifurcation. The pandemic has created one world among high income people who can work at home and make discretionary purchases, and a second world of people who are more likely to be unemployed and/or more limited in their buying ability. While the pandemic has inconvenienced more affluent consumers, others have experienced a severe economic crisis that is likely to extend for some time.
Economists talk about the “K-shaped” recovery—to describe how different segments have experienced, and will continue to experience, the effects of the pandemic.[ii]Our research shows that the K-shaped recession and recovery are features of many economies and a direct outcome of the pandemic’s acceleration of a long-term change in the labor force.
Globally, the chances of being unemployed were about six times higher among low income workers compared to high earners though that varies by country. The ratio is higher in the United States (nine times as likely). While in Germany, low-income workers were only four times as likely to be unemployed. The difference is likely the result of Germany’s Kurzarbiet scheme to keep workers attached to their employers (so they aren’t officially unemployed) compared to the U.S. use of unemployment insurance. Similar schemes are set-up in all Western European countries.
With the pandemic, unemployment was, in many cases, spurred on by an inability to work from home. Consistent with World Bank research that finds that “jobs more amenable to WFH are more prevalent among workers with high levels of education, in salaried employment, and among younger workers,”[iii] high income workers in our tracker are almost twice as likely to be working at home as low income workers.[iv]
Spending bifurcation is also very clear. We track spending intent on 15 categories of goods and services ranging from groceries to travel. Some of these, like housing and medicines, are essential, or non-discretionary from the point of view of the consumer. Others, like entertainment and electronics, can be more easily postponed or managed without. This is discretionary spending.
Globally, since early May, the difference in discretionary spending intent has widened. At that time, approximately 40% more high-income than low-income households planned to spend more on discretionary goods. By the beginning of January, about twice as many high-income households reported such plans.
Not only are high income households now even more willing to open their wallets for “nice to have” items, they are also a third more willing to pay for the contactless commerce and other forms of convenience accelerated by the pandemic. This differs quite a bit by country. Germany and the Netherlands lead the way by being three to four times more likely to pay for convenience respectively. And despite the importance of convenience during the pandemic, lower income households are less willing (or able) to pay for it.
How should businesses respond?
For the past few years, we have advised Retail and other consumer companies to prepare for a corresponding bifurcation between price-based value and value delivered through differentiated product or services.[i] Indeed, priced-based mass merchants and luxury brands fared well while others struggled during the pandemic. Possibly more than ever, companies should urgently refine their focus.
Specifically, they should:
Deepen empathy for consumers and employees. Wall Street and Main Street have experienced the pandemic differently. Don’t be fooled by rising indices. Reconnect with and evaluate your investments in your customers and employees to better understand their experiences and needs.
Make trust a guiding principle. Trust in institutions overall is in decline, but it is critical to success. Eighty-five percent of customers choose trusted brands over others, compared with only 60% who select brands they don’t trust.[v] Trust has clear impact on financial performance.[vi] Investing in and continuously building mutual trust with consumers can help ensure they come along with you on the journey, even when inevitable shocks occur.
Become more granular in your consumer observations. The standard, historical data relied on pre-pandemic may not capture new consumer realities. Decisions made based on old data models can easily go wrong. While continuing to rely on judgment and instinct, leaders should also get creative in seeking new forms of outside-in real-time consumer, marketplace, competitive, and economic data to inform decisions.
Become more precise in your value propositions. Adjust how you segment consumers, prioritize channels, establish product portfolios, position your brands, and deploy service models in ways designed to address your chosen strategy and explicitly avoids getting caught in the shrinking middle.
Be agile with your channels. The shift to digital was already happening, but COVID accelerated consumer adoption. Companies that invested heavily in their digital commerce, services, and offerings pre-pandemic (e.g., mass merchants) shifted faster between channels and fared better than those that did not. Recently, half of consumer company executives said they will be increasingly reliant on online and omnichannel strategies.[vii]
Other contributors to this piece: Steve Rogers, executive director, Deloitte Insights Consumer Industry, Deloitte LLP and Danny Bachman, US Economic Forecaster, Deloitte
Leon Pieters is the Consumer Industry leader for Deloitte Global, where he is responsible for overseeing globally four consumer sectors: Automotive; Consumer Products; Retail, Wholesale & Distribution (RWD); and Transportation, Hospitality & Services (THS). Leon is charged with setting the overall strategic direction and go-to-market strategy for the practice.
Anthony is a partner in Risk & Financial Advisory within Deloitte & Touche LLP. He currently serves as both the US Consumer Industry Leader and Advisory Consumer Industry Leader. Previously, he led Advisory’s Finance Transformation practice and is a former member of Deloitte’s cross-business Finance Transformation leadership team. With nearly 30 years providing finance transformation services to multinational clients in the consumer products, manufacturing, transportation, retail and distribution sectors, he focuses on assisting clients with transformational projects involving the development and/or evaluation of finance operations and programs designed to improve financial integrity, compliance and operational effectiveness and efficiency.
Dr. Cedric Dark, Assistant Professor at Baylor College of Medicine & Board Member with Doctors for America joins Yahoo Finance’s Kristin Myers to break down the latest coronavirus developments as the U.K. authorizes emergency use of the Pfizer, BioNTech vaccine. For 2020 election results please visit: Election results: https://www.yahoo.com/elections Subscribe to Yahoo Finance: https://yhoo.it/2fGu5Bb
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When a global crisis – such as the COVID-19 pandemic – strikes, companies face difficult choices around issues like layoffs, talent and prioritizing corporate purpose beyond shareholder value. At Booz Allen, one of the world’s largest IT consultancies, CFO Lloyd W. Howell, Jr., was faced this year with a wholesale transition to remote work while also looking after the needs of the company’s 27,000 employees. Remarkably, Booz Allen has avoided any layoffs despite the extremely challenging global environment.
I recently conducted a Q&A with Lloyd to ask him about how he, as CFO, was able to navigate one of the most difficult challenges in decades. I also delved into Booz Allen’s broader approach to talent management, which informed Booz Allen’s decision to retain all staff during the COVID-19 crisis. Finally, I asked Lloyd about his own experiences and outlook as an African-American CFO at a time when businesses, including his own, are confronting and being called to act upon ongoing racial inequity.
Jeff Thomson: Amid COVID-19, business continuity was top of mind for CFOs who were tasked with hard decisions like staffing cuts. As many companies laid off staff for cost containment, Booz Allen, in contrast, guaranteed employment and continuing benefits for all 27,000 of its employees through July 1. What cost containment measures did you put in place to ensure business continuity? What role did you play in the decision to keep all staff employed? How did you restructure financial resources to make this happen?
Lloyd W. Howell, Jr.: We sensed in late January that what was then an overseas pandemic could ultimately impact our business, and from those early weeks we established three priorities that drove every decision: First, we would protect the health of our people, their families and our communities; second, we would continue to support the critical missions of our clients, and third, we would work to ensure the financial and institutional resilience of our firm.
In March, we saw that our employees, who directly deliver our revenue and were now mostly teleworking, were fearful about the pandemic’s impact on their jobs and families. We leveraged our business’ strength to remove that worry quickly and guarantee full job security through at least July 1. We are a values-driven firm, and that approach to initially support our people was core to what we stand for.
We ran multiple models to assess the potential COVID-19 adverse impacts to our firm. My finance organization worked with experts in our health care practice to estimate how much sick leave or elder and childcare leave people might end up needing, how much our client work could be impacted, and how our communities could be hit.
Those models indicated that $100 million, referred to as our Employee Resiliency Fund, could cover it, and other financial modeling helped us determine where we could repurpose existing funds without impacting our overall financial performance. Given our exceptionally strong balance sheet built over the years, we had the flexibility to take care of our people. Separately, we worked with our People Services organization to determine where to apply those funds.
We found the money in some obvious ways, and some tougher ones. We knew no one was going to be traveling to or sponsoring conferences and we could discontinue large celebrations like holiday parties and off sites this year. Beyond that, senior executives sacrificed some compensation, and we held off promotions, raises and hiring in parts of the business.
As a result, beyond preserving jobs (and we’ve still not laid anyone off due to COVID), we funded emergency time off, more dependent care, greater funding of our Employee Resilience Fund and grants to our local communities. With reduced job worries, our employees have been more productive than ever, our financial performance has been exceptional and we still have some of the $100 million available if there are new COVID-related impacts later this year.
Thomson: Like many other companies, Booz Allen had to rapidly transition much of its staff to working from home amid the pandemic. As working from home becomes the new normal, is the company rethinking investments in facilities and telework technologies, staff management and customer service? How are you contributing to these conversations as CFO?
Howell: We were in a relatively strong position from a technology standpoint when the move to telework began. During the week of March 9, we determined that majority telework was necessary; we did a test run with maximum telework among our 27,000-plus employees that Friday and when we saw the network and our collaboration tools holding up so well, we announced the move to maximum telework on Sunday. We went from about 20% telework to well over 80% almost overnight, and eventually to over 90%. For those employees whose jobs required them to be in our office or on a client site, we focused on developing extensive safety protocols.
We discovered that people were actually more productive at home, and taking less time off, which has resulted in strong business performance in our past two quarterly earnings reports. However, it is clear this level of work is not sustainable. We know that the stress of childcare, schools, parent care and other issues are wearying, and we’ve placed a great focus on providing resources, mental health support and other assistance. We have also been very proactive in encouraging people to take time off to refresh themselves; even a week off helps people return to work in a better mental place. While some employees begin to return to the office, most will work from home for some time, and we continue to look at and assess the challenges of working from home in this environment from a financial and people management focus.
My organization is looking at continued investments in technology and other ways to support robust telework, and we initiated projections regarding our future real estate needs but, frankly, it’s too early to consider major decisions. We just don’t know the full course of this virus and what will happen afterwards. We also are listening closely to clients, because they are finding their way, and because their needs will impact our plans.
Thomson: Major upheavals and organizational changes make it more important than ever for companies to have strategies for talent acquisition and retention. What is your approach to talent management as head of Booz Allen’s finance function? When it comes to hiring finance professionals, what skills and types of backgrounds do you look for? How can finance education programs better equip entry-level employees with these skills?
Howell: As an African American executive with an engineering degree, I’ve seen firsthand the impact of diversity on organizational and financial success. In my current CFO role, I’ve never been more convinced that diversity is core to operating as a high functioning organization that will attract and retain talent, particularly in times of crisis. Long before this summer’s national focus on race and social equity – a topic on which my firm has been outspoken – I have focused on developing and recruiting against a broader definition of diversity within my organization.
Beyond the traditional measures of diversity, I find an even greater impact on business performance comes from giving the same level of attention to recruiting and developing staff with diverse skillsets and training them on how to apply their unique professional expertise to higher-level financial problems or business crises within our firm. Within my department, we have staff trained in tax accounting, Sarbanes Oxley regulations, treasury functions, government accounting, compliance and other areas.
But to raise this diversity of training from a slate of staff with functional skills to the level of influential strategic business partner requires development, mentoring and fostering an environment of credentialization. An important part of diversity in a financial organization is supporting and encouraging diversity in credentials and certifications that provides a level of trust and confidence to the larger organization we serve.
We ask our financial staff to look at larger problems with a “CFO mentality,” meaning that every individual decision by staff at every level should be made as if they are sitting in my own chair, looking more broadly at impacts across our company and market. To get there, as an example, we train our professional staff to look beyond the mechanics of cash collections, to understand the end-to-end process and impacts, starting with client issues related to payment timing all the way to the impact on cash deployment and guidance to investors. With that context, their diverse core skillsets have greater influence and inclusion in corporate decision-making.
Thomson: As you just indicated, more business leaders are understanding the tangible benefits diversity delivers. What does Booz Allen do to attract and retain minority talent? What are your personal perspectives on this, as an African American finance professional who has worked with Booz Allen for most of his career and has reached a senior leadership position?
Howell: I spoke about this on Booz Allen’s most recent earnings call, in which we opened our call – before talking about our finances – with a lengthy discussion of our firm’s approach to addressing race and social equity. The past few months have been challenging for our country and our firm. July 18 marked 32 years since the day I joined Booz Allen. This firm is my family, and just like with all families, sometimes difficult conversations are needed. We’re in one of those times. We have one of the most diverse leadership teams in corporate America today, and our Board of Directors is also much more diverse than most. I’m proud of that; it’s an important start.
But it is also clear that we have work to do inside Booz Allen and throughout society. Given my place in this “family,” it was meaningful to me to help craft our six-point equity agenda that includes a full independent review of how all our business practices impact people of color, educational actions and philanthropic investments. To be a force for change in the world, we must start by ensuring that every person at our firm feels empowered, and that those who have been marginalized in the past know they have a voice, a seat at the table and an opportunity to thrive.
When employees and candidates see our commitment and the results of our efforts, it will reinforce their desire to continue to be a part of our work, and the success of the business and our clients.
Thomson: You began your career with Booz Allen as an engineer, before obtaining your MBA and then rose to a senior leadership role in the finance department. How did you bring your skills and background in the technical side of business to bear in being a leader and decision-maker? How does your engineering background inform your approach to finance?
Howell: I began with an interest in engineering, which led me to opportunities and increasingly greater responsibilities at Booz Allen, but I have always felt that no career is linear. Circumstances change, things happen, you learn and develop experience in new areas and these impacts can take you to a place you hadn’t expected. I ended up having decades of experience running parts of Booz Allen’s client-facing business.
I think that has made me particularly effective in my CFO role, in large part because I can communicate and articulate needs as I would have wanted to hear it in my previous roles. I’ve been in the shoes of my internal clients for a long time and appreciate the pressures they are under and the performance they are trying to achieve and how to help them as best I can to achieve that performance.
Among the most effective tactics for my own career success, I think, has been a willingness to admit when I am wrong and relying on mentors and my surrounding colleagues. When people try to “fake it until they make it,” eventually they are found out. I think there’s nothing wrong with admitting when you don’t know something. When you do, more times than not, folks are very open and helpful in response. Beyond that, I’ve always reached out to colleagues, mentors and coaches for advice and counsel. I think the best education and learning process is to learn from others. That was essential as I took over the CFO role. Finance is a language. To be good, I think you need to listen to others, understand and learn the language.
This article has been edited and condensed. Follow me on Twitter. Check out my website.
I’m president and CEO of IMA (Institute of Management Accountants). Prior to joining IMA, I was the CFO for business sales at AT&T. In this column I’ll draw on my experience to offer CFOs – and their teams – insights and ideas related to challenges of the position, in light of market demands and global economic conditions. During my tenure at IMA, I’ve spoken on accounting regulatory issues, providing testimony to U.S. Congress on internal controls and risk management as it relates to Sarbanes-Oxley implementation, appearing before the SEC and PCAOB on critical regulatory matters impacting U.S. global competitiveness, and I served as a member of the COSO (Committee of Sponsoring Organizations) board of directors, which delivers global guidance on internal controls and enterprise risk management. I’ve authored numerous trade articles on accounting issues and recently contributed a chapter on ethical leadership to “Trust Inc.: Strategies for Building Your Company’s Most Valuable Asset,” entitled Trust: The Uncommon Denominator in an Uncommon Business World.