After people have earned some money, they traditionally spent money on housing, food, transportation and then what’s left savings, investments, vacations, and all sorts of other things. In the housing and food category, there are companies which should sell a given amount of goods and services no matter the economy. As the economy improves, there are more options to buy, as the economy slows it is back to the normal things because we all need to have someone to stay and eat something. Companies operating in these areas are known as defensive, they fight for market share but the pie is not necessarily continuing growing.

Ian Tam of Morningstar examined the sector with the following criteria:

market capitalization – greater than $ 3 billion

three month or quarterly estimate revision ( today’s consensus estimate vs what it was 3 months ago)

industry relative dividend yield ( an example is 3.3 which means it is yielding 3.3% higher than the median stock in the same sector)

forward return on equity

return on total assets

Company                   Mkt Cap         Industry Rel      Forward     Forward Return   3 Mon Est  Div

($ Bil)              Div Yield %         ROE   %      on Total Assets     Revis  %  Yield

Philip Morris            135.479           3.3                         49,850          21.7                        -0.3            4.8

Altria Group             119.337            2.5                                222          19.9                         0.5             4.0

McDonalds                  97.876          2.2                        62,000           15.9                         1.3               3.2

Colgate-Palm            59.179            0.9                       31,000             21.8                        0.0             2.3

L Brands                      20.115           2.4                         40,100            15.2                        -0.4           3.4

Pepsi Co                     145,411           1.5                                  59            10.1                           0.4           3.0

Hershey                       21.088         1.0                                 120           17.8                          1.0            2.5

B A Tobacco                98.893         2.2                                  91            13.1                          -8.2          3.7

Unilever                      111.848        1.9                                  45             10.6                          0.0          3.4

Kellogg                           25.404      1.4                                   66             9.0                          -0.1         2.9

Mr. Tam’s list goes to the top 20  with the following companies GM, Packaging Corp of America, Clorox, Diageo, Nordstrom, Sysco, Target, P&G, Mead Johnson Nutrition and Regal Entertainment

Linking to dividend paying stocks, there is many choices for which is the best company for your investment dollars. Some of them with depend on your ethics, some of it depends on where you live, but the key is there are alternatives. For the ones you buy and use the products you can see if others are continuing to buy the products and if this is reflected in the quarterly results. If you have a basket of these stocks the total return over the past 20 years would be about 12% which is a little higher than buying and holding an index fund.

There are more questions than answers, till the next time – to raising questions.