3 reasons to love Campbell Soup

The stock has a high return on equity as well as other factors that could sway investors.

By Benzinga Feb 7, 2014 4:54PM

Credit: © J. David Ake/AP

Caption: Cans of Campbell's Chicken Noodle soup

By Jonathan Yates


There is much to be said for defensive stocks like Wal-Mart (WMT), McDonald's (MCD), and Campbell Soup (CPB), among others. 


Every portfolio needs stocks that will rise with the market, but provide a bulwark in a correction or bear market. For Campbell Soup, there are three reasons for long-term investors to consider the stock.


For Warren Buffett, return on equity is paramount, according to his biographer Carol Loomis in an interview with American Association of Individual Investors.


When asked, she replied that, "It is one of the things he believes in strongly: that a company capable of producing a good return on equity and doing it consistently is the kind of company you want to be in. It's just a good marker to see what kind of company it is. A company with a standard balance sheet that can make 20 percent return on equity is a jewel. That’s the kind of thing that investors should be looking for."


The return on equity for Campbell Soup is 30.50 percent.


Also 50 percent higher is the dividend yield than that for a member of the S&P's 500 Index or around 2 percent. The dividend yield for Campbell Soup is just over 3.1 percent. Both McDonald's and Wal-Mart have dividend yields that are higher than the S&P's 500 Index average.


Where Campbell's is below the average is in its beta.


The beta for the stock market as a whole is 1. As detailed in another article on Benzinga, studies have show that stocks with lower betas perform better over the long term. The beta for Campbell Soup Company is 0.39. That means that the share price for Campbell's moves up and down less than half as much as the stock market. That results from its shareholders not wanting to sell.


With the high dividend yield and robust return-on-equity, those owning the stock have reason to be satisfied. Campbell is about 11 percent above it 52 week low. So for those looking to buy when a publicly traded company is near its year low, there are three reasons to be bullish for the long term about Campbell Soup.


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2Comments
Feb 9, 2014 9:02AM
avatar
Campbell Soup has a very unique way of borrowing money.  They can create a new flavor soup and stock all the stores with it and use the money for any purpose they want.  I ponder over the shelves in the grocery store and marvel at the Campbell products available.  This is a good way to adjust the balance sheet.
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