Mid-cap Consumer Goods Stocks With Return Potential

Published Tue, 29 Sep 2015 12:15 CET by DividendYields.org

When investors consider financial ratios individually, they may put their money in stocks that do not really fit in their profile. For instance, a high EPS alone doesn’t say too much about a company, if one doesn’t look into the company’s revenues, net income, sustained dividend payments and so on. Conversely, a high EPS combined with a good dividend yield above 3% and consistency in good, strong financial results, may suggest a great investment.
The article analyzes 3 mid-cap stocks in the consumer goods sector, but in different industries. All three have outperformed the market on YoY comparison, whereas their average EPS is $1.05 and their average dividend yield is 3.80%. Additionally, their average beta of 0.53 offers the potential of a higher rate of return combined with the average payout ratio of 68%.

Crown Crafts, Knoll and Orchids Paper Products Stock Performance Year over Year Graph
Crown Crafts (Nasdaq: CRWS) is a Louisiana-based company that distributes infant, toddler and juvenile consumer products in the U.S and internationally. The reported YoY income in Q2 2015 was down by 27.3% ($830,000 from 1,142 million) due to after-tax charges related to a past lawsuit. On the upside, CRWS’s dividend yield of 3.99% combined with an EPS of $0.59 makes the stock a good long-term investment, considering that its payout ratio is low and in line with the clothing industry average payout ratio of 47.7%. Consensus estimates an average EPS of $0.68 through 2017, which is expected to offer long-term shareholder value and a steady return potential. The company’s beta of 0.55 makes the stock less volatile, making CRWS a risk-reducing asset in a diversified portfolio.

Knoll (NYSE: KNL), a Pennsylvania-based business equipment company, engages in the design, manufacture and sale of branded office furniture and textiles in the U.S, Canada and Europe. In Q2 2015, the company’s cash & cash equivalents were down by 29.56% compared to Q1 2015 ($10.34 from $14.68). Knoll managed to lower its long-term debt from $290 million in Q1 to $264 million in Q2, thus improving it’s leverage ratio to 2.22 in Q2 from 2.55 in Q1 2015. In addition, it has improved its YoY operating profit margins by 27.5% ($28.3 million from $22.2 million in Q2 2014) and YoY net earnings by 59.3% ($17.2 from $10.8 in Q2 2104). The current EPS of $1.30 is expected to average $1.71 through 2017, whereas analysts estimate 35.78% earnings growth in 2015. The stock has gained 23.51% over the last year. Overall, Knoll maintains a strong balance sheet with continued net earnings growth. Combined with debt paydown and focus on diversified sources of revenue from different segments and markets overseas, it makes a good/safe bet for the dividend investor.

Name Price ($) 52 wk low 52 wk high 52 wk low % 52 wk high % Market Cap ($ b) P/E D/E Beta Payout Ratio
Crown Crafts 8.03 7.07 8.78 0.14% -0.09% 0.08 13.70 n/a 0.55 54%
Knoll 22.16 16.52 26.06 0.34% -0.15% 1.08 17.05 1.15 0.72 37%
Orchids Paper Products 26.72 21.42 30.00 0.25% -0.11% 0.27 21.29 0.34 0.32 112%

Orchids Paper Products (NYSE: TIS), an Oklahoma-based company engaging in the manufacture and sale of tissue products across the U.S, has reported strong QoQ net income growth of 231.75% in Q2 2015 ($3.9 million from $1.2 million). Also, TIS’s 22.64% YoY revenue growth ($142.7 million from $116.4 million) has generated an EPS of $1.25. Currently, the stock trades at $26.36, almost in line with its 52-week high, which combined with a dividend yield of 5.31% and a shareholder equity growth of 18.46% ($84.8 million from $100.58 million) suggests a company focused on growth. The company’s plan to invest up $127 million for the establishment of a first-class paper making and converting facility in Barnwell, SC will likely raise investor confidence and boost stock’s performance. Shipping product operations will begin in Q1 2016 and paper making production in Q1 2017.