When most people think about publicly traded companies, a
small number of companies come to mind. There are the hot tech stocks like
Amazon, Facebook, and Tesla. You may also think of old-school companies like
Johnson & Johnson, Walmart, and Bank of America.
Yet, once people begin investing, many are surprised to
learn there are over 5,000 publicly traded companies. Each of these has shares
of stocks that trade either on one of the stock exchanges or over-the-counter.
When you get away from the well-known, name-brand companies and their shares,
you can find tremendous investment opportunities.
One strategy to find little-known stocks with excellent
prospects is to look at the companies that supply the big names on the markets.
I focus on dividend-paying stocks, and when a popular stock doesn’t pay
dividends, you can ride the popular companies’ successes by investing in their suppliers,
especially if you find dividend-paying, dividend growth stocks.
Here are four stocks to get you started:
Amcor Ltd. (AMCR) is a global leader in producing responsible
packaging for food, beverage, pharmaceutical, medical, home, personal care, and
other products. The company was founded in Australia in 1860 and now has 250
plants in 40 countries. Products include a wide range of flexible and rigid consumer
packaging.
About half (46%) of Amcor’s sales come from North America.
The balance is split between Western Europe and emerging markets. Surprisingly,
only 3% of sales come from Australia and New Zealand.
The bulk of Amcor’s product sales (68%) are for food and
beverage packaging products.
Packaging sales is a growth business. From 2014 through 2019,
Amcor reported a 7% compound annual EPS growth. Over the same period, the
company grew the dividend by a 12% yearly growth rate.
The current yield is 4.4%.
Archer-Daniels-Midland Company (ADM) is an
agricultural products company. The company divides its offerings into four
product lines: Food & Beverage Ingredients, Animal Nutrition, Industrials—chemicals
and ingredients for packaging and personal care—and Biofuels. Services include
Farmer Services, Financial Services, and Logistics.
Agricultural products and services are big business, and Archer-Daniels-Midland
is a big company. The stock has a $22 billion market cap. For 2019, the company
reported revenue of $64.3 billion and gross profits of 4.17 billion.
Archer-Daniels-Midland is also a Dividend Aristocrat,
increasing its dividend rate for 27 straight years. The company has paid a
dividend for 353 consecutive quarters, a record of 88 years of payments to
investors.
Annual dividend growth is in the high single digits, and the
current yield is 3.55%.
Leggett & Platt, Inc. (LEG) manufactures
components that are used to manufacture bedding, furniture, flooring, and
automotive interiors. The company started producing bedding components, such as
mattress springs and specialty foam, over 135 years ago.
Because Leggett & Platt manufactures component products
that go into home furnishings and bedding, the company will benefit from home
sales. Whether buyers go with new or existing homes, they often want to buy new
furniture for their new dwellings.
Leggett & Platt grows through a combination of organic
growth and acquisitions. The target is 6% to 9% annual compound growth. The company’s
dividend has increased for 47 consecutive years, and it is one quarter overdue
for its 2020 increase. Investors should expect a boost in the payout when the
economy gets back on track.
The current yield is 4.6%.
Dow, Inc. (DOW), a chemical company that produces a wide range of products, calls
itself a materials science leader committed to delivering innovative and
sustainable solutions for customers in packaging, infrastructure, and consumer
care.
Dow’s product technologies list has over 20 items, each of
which covers a variety of chemicals in the specific categories.
Although not related, Dow is one of the 30 Dow Jones
Industrial Average (DJIA) stocks. The current Dow is the result of the
separation of Dow and DuPont in April 2019. For 2019 the company reported
revenue of $42.9 billion, with gross profits of $6.37 billion. Operating income
was $3.8 billion.
In November 2017, Dow cut its dividend from $0.46 per share
down to $0.38 per share. The reduction came after a decade of strong dividend
growth coming out of the 2007-2009 recession.
In April 2019, after the spin-off, the dividend was
dramatically increased to $0.70 per share. The current yield is 6.7%.
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