Consumers are the heart of the U.S. economy, and their spending accounts for more than 68% of America’s economic output. By following their money, you can find some noteworthy long-term investment ideas — and they’re often from brands you know and love.
The companies have enjoyed years of growth and dividend payments, but their performance has slumped amid concerns that consumer spending is slowing as high inflation hurts consumers, who are tightening their budgets and scrutinizing their spending.
Consumers should eventually bounce back, so it might be wise to stock up on these tried-and-true favorites while they’re on sale.
Here are four of them.
A total investment of $600 will buy you shares of each. Buy and hold and enjoy long-term growth, a world-class brand and steadily increasing dividends.
1. Starbucks
The coffee giant operates more than 38,000 stores worldwide while delivering above-market returns on investment. Starbucks (Nasdaq: SBUX) The company is facing questions about its growth prospects as consumers appear to be pushing back against rising menu prices. Competition is getting tougher It is challenging Starbucks in China. The stock price is currently Price Earnings Ratio The stock’s price-to-earnings ratio (PER) is 20, well below its 10-year average of 43.
Starbucks continues to open stores, and analysts still believe the company’s earnings will grow at more than 12% annually for the next three to five years. Some may be holding off on premium coffee purchases, but it would be an exaggeration to say the brand has lost its luster. Starbucks currently has a 3% starting dividend yield, and the company has raised its dividend for 14 consecutive years. At this point, the selloff seems overdone.
2. Nike
Major apparel company Nike (NYSE: NKE) is another winner that’s been accused of losing its edge on the field. Its shares plummeted after the company predicted a 10% drop in sales next quarter. The company is rushing to reinvent itself in response to pressure from smaller competitors that have chipped away at its dominance in certain product categories. But the fact remains that the Swoosh remains the industry leader by a huge margin. The company dominates professional sports, working with some of the world’s most iconic athletes, from Michael Jordan to Caitlin Clark.
Ultimately, Nike is likely back on track. After all, you can’t dominate an industry for decades without the ability to adapt when necessary. Analysts expect annual earnings to grow at least 12% going forward. The company’s stock typically trades at more than 37 times earnings, but its price-to-earnings ratio is now at just 19 times. Its dividend has increased for 23 consecutive years, and its yield is the highest it’s been in recent memory. For Swoosh believers, this is a great time to be a contrarian.
3. Hershey
Major confectionery company Hershey (NYSE: HSY) Hershey’s is not a victim of its own problems, it’s just unlucky. The worst cocoa harvest in generations has sent commodity prices soaring to all-time highs, threatening Hershey’s profits. The booming appetite-suppressant GLP-1 drug has also soured sentiment toward the company’s stock. But Hershey’s products are snacks, not meals. Its various brands, including Hershey’s, Reese’s, and Twizzlers, dominate American store shelves.
Analysts have cut their earnings growth forecasts to the low- to mid-single digits, and the stock has traded correspondingly lower at a price-to-earnings multiple of 18 times, down from its 10-year average of more than 27 times earnings. Hershey also offers a well-funded dividend, which currently yields about 3% and has been growing for 15 consecutive years. The cocoa problems are real, but they could be a temporary problem in five years. Hershey’s stock has rarely been this cheap.
4. McDonald’s
Iconic Restaurant Chain McDonald’s (NYSE:MCD) The company has struggled with cost-conscious consumers. McDonald’s prices have risen to the point that they’ve called into question the restaurant’s brand value, and people are pushing back. Executives discussed the issue on the company’s first-quarter earnings call and have responded with $5 meal bundles and other incentives to encourage customers to use the company’s smartphone app.
Pricing pressures have Wall Street nervous about McDonald’s future growth prospects. The stock has fallen to just 20 times P/E, below its average P/E ratio of 25 over the past decade. But the company is fundamentally sound. It makes most of its profits from its restaurant footprint, and meal plans could ease pricing concerns. Meanwhile, McDonald’s is a dividend giant, with 49 consecutive years of dividend increases and a solid 2.7% yield. Analysts still expect high single-digit annual earnings growth, but that growth could accelerate if consumer demand recovers. For now, the stock is a proven winner on the market.
Should I invest $1,000 in Starbucks right now?
Before you buy Starbucks stock, consider the following:
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Justin Pope The Motley Fool has a position in Hershey’s. The Motley Fool has positions in and recommends Nike and Starbucks. The Motley Fool recommends Hershey’s and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool recommends Hershey’s and recommends the following options: long January 2025 $47.50 calls on Nike. Disclosure Policy.
The smartest dividend stocks to buy right now for $600 Originally published on The Motley Fool
