9 Fairly Valued Mid-Cap Consumer Discretionary Dividend Growth Stocks: Part 2B by Chuck Carnevale, F.A.S.T. Graphs


Mid-cap stocks are often overlooked by investors and not widely covered on Wall Street or many financial websites and blogs.  However, I consider it a mistake because there are many mid-size companies that are attractive long-term investment opportunities.

Moreover, in the general sense, smaller companies tend to have more room to grow than their larger more well-known counterparts.  Consequently, if a larger total return is part of your investment objectives, then high quality growing mid-caps might be just the ticket.

Although mid-caps generally have more room to grow, not all mid-caps are growing enterprises.  In fact, mid-cap companies can be found in virtually every industry or sector, and like all companies, possess their own unique characteristics and fundamental metrics.  Some mid-caps are growth stocks, some are dividend growth stocks and some offer high-yield and everything in between.  Therefore, as it is with all stocks, selectivity is the key to success.

This article focuses specifically on dividend paying consumer discretionary mid-cap stocks.  Even though some of the following names are relatively small, most of them are widely recognized companies.  Furthermore, regardless whether your investment objective is growth or yield, there may be something in the following group for everyone.

9 Fairly Valued Mid-Cap Consumer Discretionary Dividend Growth Stocks

The following portfolio review summarizes the 9 fairly valued mid-cap dividend growth stocks in the Consumer Discretionary sector.  The portfolio review lists them by ticker, name, credit rating, sector, dividend yield, market cap and long-term debt to capital.

Mid-Cap Consumer Discretionary Dividend Growth Stocks

Since many readers may not be familiar with each of these mid-cap selections, I offer the following overview of each of the nine research candidates. Courtesy of S&P Capital IQ, I also included a short business description on each. Additionally, I have provided earnings and price correlated historical F.A.S.T. Graphs on each with a calculated return forecast out to 2017 based on what I considered the most appropriate valuation reference line.

F.A.S.T. Graphs™ Tutorial

In order for the reader to get the maximum benefit from the following presentation, I offer a short tutorial illustrating the various components presented in a F.A.S.T. Graphs™.  To accomplish this, I will present each component of the graph separately as I rebuild an entire graph.  I have chosen Tupperware Brands Corporation, Inc. as my tutorial example.

My first screenshot reflects a plotting of earnings per share.  The green shaded area represents a mountain chart of the company’s earnings over the timeframe drawn.  The orange valuation reference line contains two important aspects.

The first aspect is a multiple of earnings (P/E ratio) that is listed in the orange colored rectangle (red circle) in the FAST FACTS to the right of the graph.  In this example, the orange line represents a P/E ratio of 15.  In other words, any time the stock price touches the orange line anywhere on the graph in this example it will be trading at a P/E ratio of 15.

The second aspect of the orange line is the slope which is equal to the earnings growth rate.  In this example, the orange line is increasing at the earnings growth rate (the green rectangle in FAST FACTS) of 7.3% (yellow circle).  Although there is some cyclicality with earnings in between, this growth rate is calculated as the annualized growth from the first year’s earnings per share to the last year on the graph.

Mid-Cap Consumer Discretionary Dividend Growth Stocks

With my second screenshot I overlay monthly closing stock prices.  This illustrates how stock prices move in conjunction with earnings over the long run.  Moreover, periods of overvaluation (when price is above the orange line), fair valuation (when price is touching the orange line) and undervaluation (when price is below the orange line) is clearly revealed.  Most importantly, since stock price tracks earnings, it is clear that the company’s earnings achievement is what drives the capital appreciation component (growth portion) of total return.

Mid-Cap Consumer Discretionary Dividend Growth Stocks

This next screenshot adds a second valuation reference line (the dark blue line) which is a calculated normal P/E ratio for the timeframe drawn.  In this example, the normal P/E ratio line represents a multiple of 13.4 (red circle).  With both of these valuation reference lines on the graph, a clear perspective of a range of valuation (in this example that range is a P/E ratio of 13.4 – 15) is revealed for analysis.

Mid-Cap Consumer Discretionary Dividend Growth Stocks

This next screenshot adds a plotting of the company’s dividends per share prior to being paid out of earnings.  The area below the light green line (it appears white to many people) represents the portion of earnings paid out to shareholders.  Therefore, the company’s dividend payout ratio (POR) for any historical year is graphically presented for instant reference.

Mid-Cap Consumer Discretionary Dividend Growth Stocks

This next screenshot presents a second dividend reference.  The light green shaded area above the orange line indicates the same dividends seen above after they have been paid out to shareholders.  This light green shaded area (dividends paid) represents the dividend income component of total return.  Therefore, a F.A.S.T. Graphs™ reveals dividends in two ways:  First prior to being paid out of earnings, and then after they have been paid out of earnings.

Mid-Cap Consumer Discretionary Dividend Growth Stocks

The complete F.A.S.T. Graphs™ presented below illustrates the earnings and price relationship, offers two valuation reference lines and graphically presents the company’s dividend payout ratio and dividends after they are paid out to shareholders.  Most importantly, a perspective of the company’s current valuation relative to fundamentals is clearly illustrated.

Mid-cap consumer discretionary dividend growth stocks: Tupperware Brands Corp (TUP)

“Tupperware Brands Corporation operates as a direct-to-consumer marketer of various products across a range of brands and categories worldwide. The company engages in the manufacture and sale of design-centric preparation, storage, and serving solutions for the kitchen and home, as well as a line of cookware, knives, microwave products, microfiber textiles, water-filtration related items, and an array of products for on-the-go consumers under the Tupperware brand name.

It also manufactures and distributes skin and hair care products, cosmetics, bath and body care, toiletries, fragrances, jewelry, and nutritional products under the Avroy Shlain, NaturCare, Nutrimetics, Fuller, BeautiControl, Armand Dupree, Fuller Cosmetics, and Nuvo brands.

The company sells its products directly to distributors, directors, managers, and dealers. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005.

Tupperware Brands Corporation was founded in 1996 and is headquartered in Orlando, Florida.”

Investment Thesis

I offer Tupperware Brands Corporation as primarily a valuation and high current yield opportunity.  Earnings have been weak in fiscal 2015 and that is expected to continue but at a lower rate for fiscal 2016.  Nevertheless, that weakness is reflected in the price and current low valuation.  However, management has been taking action to reinvigorate growth going forward.  Consequently, Tupperware Brands Corporation is also offered as a potential turnaround.

Importantly, the company reports quarterly earnings on April 20, 2016.  Therefore,

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