Large cap companies, generally defined as companies with a market capitalization in excess of $10 billion, typically possess a solid brand name, fundamentals, income from dividends (in some cases), and competitive positioning which can help fortify your portfolio. The four companies below contain those qualities.
Retailing giant Wal-Mart Stores, Inc. (NYSE:WMT), generally regarded as the local go to place for low priced merchandise, compels people to drive miles past more expensively priced grocery store competitors to shop at Wal-Mart. Two-thirds of the population lives within five miles of a Wal-Mart according to a Reuters’ article.
Wal-Mart Stores, Inc. (NYSE:WMT) also possesses excellent fundamentals for a giant behemoth. Revenue and free cash flow grew 5% and 17%, respectively, over the last year. Its long term debt to equity ratio sits at 47% residing below my personal threshold of 50%.
Wal-Mart currently pays out $1.88 per year per share in dividends, yielding 2.5% as of this writing. Wal-Mart prudently pays out 41% of its free cash flow saving the rest for other forms of capital returns, such as share buybacks and business expansion.
Wal-Mart’s empire of 10,800 stores vastly exceeds the 1,800 stores in the possession of its No. 2 competitor Target Corporation (NYSE:TGT). This will continue to give Wal-Mart Stores, Inc. (NYSE:WMT) the ability to competitively buy and sell products at an ultra-low price ensuring customer loyalty and the demise of its smaller competitors and adding superior shareholder returns in the process.
Beverage giant The Coca-Cola Company (NYSE:KO) conjures up images of its signature trademark cursive white writing on a red can for its flagship product “Coca-Cola” soda. No other company in the world enjoys the brand name recognition of Coca-Cola. Other Coke product lines also enjoy notoriety like Fanta, Sprite, Minute Maid orange juice, and Dasani bottled water.
Coca-Cola continues to enjoy growth to its top and bottom lines despite its large size. In 2012, The Coca-Cola Company (NYSE:KO)’s revenue and free cash flow grew 3% and 20% respectively. Its debt to equity ratio calculates at 44% as of the most recent quarter.
Coca-Cola currently pays out $1.12 per share per year in dividends, translating into a very healthy 2.8% as of this writing. Coca-Cola pays out 57% of its free cash flow in dividends, a little high for my tastes, but all of the positives outlined above outweigh this one negative.
The Coca-Cola Company (NYSE:KO)’s 300 bottling partners give it the distribution power necessary to carry out the logistical miracle of selling its beverages on a global scale. This distribution system in addition to its brand recognition gives this company the uniqueness that will continue to serve its shareholders well with superior shareholder returns.
Food manufacturing giant The J.M. Smucker Company (NYSE:SJM) makes well-known brand names, such as Smucker’s Jelly, Jif Peanut Butter, and Folgers coffee.
Smucker’s increased sales and free cash flow 9% and 96% respectively year to date. Smucker’s long term debt to equity ratio stands at 38% as of the most recent quarter. Cash flow increases stem from lower cash costs for inventory and lower capital expenditures.
As of this writing, J.M. Smucker pays $2.08 per share per year in annual dividends yielding 2.1% with total dividends equating to 31% of free cash flow.
The J.M. Smucker Company (NYSE:SJM)’s shareholders will continue to benefit from strong brand name recognition giving its products a certain level of uniqueness. Smucker’s “International, Foodservice, and Natural Foods” increased 28% in the last quarter giving indication of future growth potential in those arenas as well.
On the whole, these companies sell products essential to human living such as low cost merchandise, bottled water, and food such as peanut butter. These factors provide the solid growing fundamentals that convert to superior returns for shareholders in the form of dividends and capital gains.
The article 3 Large Cap Companies for Your Portfolio Today originally appeared on Fool.com and is written by William Bias.
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