Two Winners on a Weak Dollar
As Europe and China strengthen, the dollar has lost some of its value, and as recovery gains traction in the US, the dollar weakness will grow. But that doesn't have to be a bad thing.
While the company does carry a large debt load due to heavy invest-ment in its network, it typically gen-erates almost $1 billion in free cash flow annually. This cash has allowed it to pay a steadily rising dividend for the past five years and fund a large annual share repurchase program. Even if the dollar doesn't decline further, Western Union is a great buy.
Mead Johnson Nu-trition (NYSE:MJN)
Spun-out from Bristol-Myers Squibb (NYSE:BMY) in 2009, Mead Johnson is an excellent hedge against a declining dollar, while offering the stickiness of a consumer staples company.
Selling infant and children's nutri-tion products, Mead Johnson has a global presence, with almost 73% of revenues sourced outside of the US. Since becoming an independent company, Mead Johnson has averaged compound annual revenue growth of 8% per year.
As the ranks of the global middle class have grown, demand for pre-mium infant formula has burgeoned. China has been a major driver of that demand, with a market for premium formula currently valued at $8 billion annually and growing by about 8% per year. Mead Johnson has grabbed a 14% market share in the country. Latin America also presents a huge growth opportunity, as the region's birth rate and incomes continue to rise.
Free cash flow has risen to almost $500 million annually over the past three years, while earnings per share (EPS) have jumped from $1.99 in 2009 to $2.48 last year. Revenues should top $4 billion for the first time this year. That's funding a steadily ris-ing dividend, currently $.30 quar-terly, for a modest 1.7% yield.
Editor's Note: This article was written by Benjamin Shepherd of Personal Finance.
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