Editor’s Note: Related tickers: Praxair, Inc. (NYSE:PX), Air Products & Chemicals, Inc. (NYSE:APD), Sonoco Products Company (NYSE:SON), Bemis Company, Inc. (NYSE:BMS), E I Du Pont De Nemours And Co (NYSE:DD), Syngenta AG (ADR) (NYSE:SYT), Monsanto Company (NYSE:MON)
Following a weak second half of 2012, the industrial materials sector has shown some signs of picking up pace. Even though the fiscal cliff concerns dampened demand across the U.S. economy and weak growth overseas continued to exert pressure in the first quarter, better days for the industrial materials are likely in the quarters ahead. The risks to the downside persist, but the outlook is more optimistic.
Among stocks in the materials sector, Value Line identifies a few dividend-payers with a proven track record of long-term price stability—referring to low volatility of price returns—and sound financial strength—implying solid corporate balance sheets.
Below is a closer look at five of its best-rated dividend payers, each yielding more than the average indicated dividend yield of the S&P 500 Composite Stock Price Index, and boasting a market cap of at least $3.6 billion. Not unlike this market-beating strategy, ardent investors would be wise to pay attention.
Praxair, Inc. (NYSE:PX)
The company is also focused on delivering productivity savings of at least 5% of total cost stack each year, which is helping boost, its operating cash flow. Praxair, Inc. (NYSE:PX)’s operating cash flow, at $2.8 billion in 2012, has grown at a 12% CAGR since 1992. As regards its financial performance in 2013, the company expects “base volumes to grow modestly given the current uncertainty in the macro-economic environment,” with adjusted EPS projected to grow by between 6% and 9%. The stock is valued at 17.2x forward earnings. Billionaire Steve Cohen significantly boosted his stake in Praxair, Inc. (NYSE:PX) during the first quarter; see Steve Cohen’s top picks.
Air Products & Chemicals, Inc. (NYSE:APD)
It now expects a full fiscal year 2013 EPS growth of between 0.9% and 3.7%. A faster pace of the global economy’s expansion in the second half could surprise to the upside. Valued at 15.5x forward earnings and boasting an EPS growth rate of 10.5% for the next year, Air Products & Chemicals, Inc. (NYSE:APD), like Praxair, is listed among the new Goldman Sachs’ cyclical stocks picks with “lower valuations and stronger growth expectations than the market,” as described by a MarketWatch article.
Sonoco Products Company (NYSE:SON)
The company projects EPS growth of between 2.3% and 5.0% this fiscal year. Moreover, the company’s long-term targets are $5.5 billion to $6 billion (up from approximately $4.8 billion in 2012) for sales and 10% annually for base EPS. Growth will be driven by organic sales, new products, and acquisitions. Its longer-term strategy also includes shifting sales mix toward less cyclical consumer-related markets. The company’s exposure to volatility in raw material prices and its relatively sizable exposure to Europe remain its weak points. Sonoco Products Company (NYSE:SON) is trading at 15x forward earnings, on par with its industry’s forward multiple.
Bemis Company, Inc. (NYSE:BMS)
In the first quarter, Bemis Company, Inc. (NYSE:BMS) hit a record adjusted EPS. For the year as a whole, its adjusted EPS will grow by between approximately 7% and 14%. In the long run, analysts forecast Bemis Company, Inc. (NYSE:BMS)’s EPS CAGR of 7.8%. The company expects that its growth will be driven by emerging markets’ food safety regulations, an increased consumer focus on convenience features, and a greater need for shelf stable foods. Bemis Company, Inc. (NYSE:BMS) is trading at 16.7x forward earnings, above the packaging industry’s average forward multiple of 15.1x.
E I Du Pont De Nemours And Co (NYSE:DD)
Hence, for 2013 as a whole, DuPont projects a 2%-to-7% growth in its adjusted operating EPS. Still, for the reference, its long-term sales CAGR target is 7% and its adjusted operating EPS CAGR target is 12%. E I Du Pont De Nemours And Co (NYSE:DD)’s growth drivers are its product innovation, which annually accounts for about 30% of sales, and emerging market growth, which has averaged a 22% CAGR since 2008. E I Du Pont De Nemours And Co (NYSE:DD)’s latest licensing agreements with Syngenta AG (ADR) (NYSE:SYT) and Monsanto Company (NYSE:MON) will also contribute; read more about it here and here. DuPont is trading at 13.5x forward earnings, below the commodity chemicals industry’s multiple of 14.6x.
Final thoughts
Like most dividend-paying stocks, the five companies mentioned on Value Line’s list aren’t the sexiest. From Bemis Company, Inc. (NYSE:BMS) to E I Du Pont De Nemours And Co (NYSE:DD), from Sonoco Products Company (NYSE:SON) to Air Products & Chemicals, Inc. (NYSE:APD) to Praxair, each of the aforementioned equities offer solid safety moving forward, and should be relatively insulated from any economic shocks that could occur in the near- to intermediate-term.
Disclosure: none
