McCormick & Company, Incorporated (MKC), The Clorox Company (CLX), The J.M. Smucker Company (SJM) – Income Match-Up: Consumer Staples vs. Treasuries

Results
When I did a similar comparison about a year ago, the yield on the 10-year was below inflation, so the Treasuries lost purchasing power. The results are much closer now that rates have come up, but stocks still hold an edge in this model. That edge comes at the cost of taking on equity risk versus the known cash flow of a treasury note.

Source: Author’s calculation.

Summary
These aren’t expected returns for the stocks; the scenario crimps dividend growth and assumes minimal growth in the stock price. The exercise is intended to compare several income streams and get a handle on the risks. The model also allows for “what-if” scenarios, so results can be compared with different assumptions.

It’s worth noting that these five stocks all trade at a premium to the S&P 500’s P/E ratio of 18.9. In short, the stocks look like a better bargain than 10-year T-notes for investors with a long time horizon, but neither these stocks nor the notes are screaming buys at these levels.

The article Income Match-Up: Consumer Staples vs. Treasuries originally appeared on Fool.com and is written by Russ Krull.

Fool contributor Russ Krull owns shares of McCormick. The Motley Fool recommends Berkshire Hathaway, Coca-Cola, and Procter & Gamble. The Motley Fool owns shares of Berkshire Hathaway.

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