For college investors, time is the ultimate ally in buying assets for long term gains.
There are many ways to exploit that advantage. As 70 percent of the American economy is based on consumer spending, stocks from that sector should naturally be in the portfolio of an investor, no matter what the age. The recent earnings being reported from food companies in the consumer sector such a Coca-Cola (NYSE: KO), the beverage behemoth, ConAgra (NYSE: CAG), the processed food prince, and The J.M. Smucker Company (NYSE: SJM), the jelly giant, are definitely showing the long term rewards of a diverse portfolio.
The days of high growth for stocks such as Coca-Cola and J.M. Smucker are long gone. According to the Wall Street analyst community, earnings-per-share growth for both PepsiCo (NYSE: PEP) and Coca-Cola will decline in the years ahead. For example, earnings-per-growth for PepsiCo this year is 10.70 percent. Over the next half decade, it is projected to be 7.86 percent.
Where To Find High Growth
For high growth, investors will have to look for small caps and mid caps.
One of the strongest segments of the consumer beverage market is sports and health drinks, with such companies as Monster Beverage (NASDAQ: MNST), Primo Water Corporation (NASDAQ: PRMW), and High Performance Beverages (OTN: TBEV). Earnings per share are projected to grow by 15 percent over the next five years for Monster Beverage. For Primo Water, earnings per share growth is expected to be 25 percent for the next half decade. High Performance Beverages is entering the hottest component of the market, sports and energy drinks, so its growth should be strong, too.
In the food group, SoupMan (OTN: SOUP), a niche soup maker, is posting revenue growth of 39.40 percent per quarter, according to Yahoo! Finance. It has also registered a gross profit. That certainly tops the negative quarterly revenue growth of minus 2.20 percent for the much-larger Campbell Soup (NYSE: CPB).
Where To Find Income
While those looking for growth should love Monster, SoupMan, Primo, and High Performance Beverages, income-seeking investors should have a great deal of affection for companies such as Coca-Cola, ConAgra, J.M. Smucker, and PepsiCo.
The present dividend yield for a member of the Standard & Poor’s 500 index is averaging just under 2 percent. Coca-Cola, ConAgra, J.M. Smucker, and PepsiCo all top that. Coca-Cola has a dividend yield of 3.86 percent. For ConAgra Foods, the dividend yield is 3.50 percent. It is 2.90 percent for PepsiCo. J.M. Smucker has a dividend yield of 2.37 percent.
In addition, those consumer giants in the food sector have a history of increasing the amount of the dividend.
That rewards long term investors. The longer the stock is owned, the more that is earned in dividend income. If the amount of the dividend increases by 6 percent annually, that means that it doubles every 12 years. For an investor in colleges, the dividend will grow tremendously over the long term.
Just because the larger companies in the food sector are past the days of rapid growth, does not mean the industry should be ignored by investors. That is also true about smaller consumer stocks that do not pay dividends. With time on their side, college investors should be able to prosper from the rewards of owning food stocks that deliver growth and income.
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Jonathan Yates is a financial writer with degrees from Harvard, Johns Hopkins and Georgetown University Law Center. While much of his career was spent working for Members of Congress on Capitol Hill, he was also General Counsel for a publicly traded corporation; and worked in the research department of a brokerage house.