What Would Santa Buy?

This time of the year always makes me a little more charitable, ‘tis the season I guess. With all the well-wishing and gift-buying, I started to wonder what the jolly ol’ fat man would buy if he were a dividend investor.

I would think Santa would be a dividend investor. He knows that stocks of companies returning cash to shareholders have historically outperformed the market, and he probably needs the cash flow to pay for materials in his shop at the North Pole. Picks would have to have a long history of charitable giving, well-beyond the normal corporate donations as a tax write-off, but a real compulsion to make the world a better place.

Wal-Mart Stores (WMT) made second on the list of most charitable corporations of 2012, after having ranked first in several prior years. The company is not normally known for its beneficence, but the $1.07 billion in cash and merchandise it donated changed my own opinion. The donation amounted to 4.5% of the company’s pretax profit and management expected the figure to increase in 2013.

Not sure if Saint Nick sees Wal-Mart as a competitor, it probably unloads as many toys as he does, but he would not be able to deny the company’s efficiency and scale. Shares pay a 2.3% dividend yield and revenue has grown by a compound annual rate of 6.1% over the last decade. Wal-Mart has decreased its share count by nearly a quarter over the last 10 years, returning more cash to shareholders and boosting earnings per share.

Like other retailers, Wal-Mart is pushing the limit to its holiday sales this year. So much so that a new ‘named’ day has popped up in the form of “Green Monday,” the Monday after Cyber-Monday. While the company reports its highest five-day total for online sales in the days leading up to Cyber-Monday, brick-and-mortar sales are expected to be weak this year.

I excluded Wells Fargo (WFC), the most charitable company in 2012 because $77 million of their total giving was a one-time donation to an organization that helps home buyers with a down-payment. Four of the top ten largest corporate donors last year were banks, and much of the giving went to these home-lending organizations. This just seemed a little self-serving to me and I wondered if the big banks were not feeling just a little guilty about sending the nation to the brink of a depression.

Santa has been appearing in ads for the Coca Cola Company (KO) since the 1920’s and I have to believe he gets some kind of kickback from the endorsement. The company is also a strong donor as well, giving almost $1 billion over the eight years to 2010.

The company established the Coca Cola Foundation in 1984 to promote global projects in the areas of water stewardship, healthy lifestyles, recycling and education. Whether the projects are part of the company’s overall branding strategy or not, they do a lot of good in just about every region on the map.

The company has managed to grow revenue by a compound annual rate of 8.6% over the last decade, extremely impressive for a mature industry. Shares pay a 2.8% dividend yield along with fairly stable price appreciation and about the most secure revenue stream in the market.

Coca Cola has been running ads for its new low-calorie Coke Life and should roll out the product in the states early next year. The 100 calorie soda uses a combination of sugar and zero-calorie stevia to bridge the gap between full-calorie drinks and the as-yet successful diet market. If Americans accept the new product the way other markets have, then the company could really push ahead of peers.

2 Comments

  1. It is no surprise that successful businesses are also charitable. Whenever and whoever you look at, starting with Buffett, ending with Gates, all are donating. As scriptures say “rich will be kept low” (meaning stay humble and charitable) they all are. Unfortunately, many leftists do not see it and try to destroy these companies taking from them and redistribute. They do not understand that when you take from rich, they will stop donating and those who would need it will end up pulling the short stick.

  2. Mike

    I didnt get paid out on my BP shares today.

    Could there be a reason? (I have been a owner since June, so it is not ex-div)

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