Tony Dejak
From the FT's Lex blog
They no longer grab the headlines like the Apples and Facebooks and Googles do. But there is something reassuring about the grand old companies of Wall Street cranking out results quarter after quarter. On Thursday, PepsiCo, ExxonMobil, Dow Chemical, Colgate-Palmolive and Kellogg all reported. A mixed bag to be sure. But they share more than just being household names.
One thing that binds these companies together - as well as distinguishing them from the latest upstarts - is an obvious commitment to dividends. Exxon upped its distribution by 7 per cent against 2011 and Dow said it would lift its dividend 28 per cent in the second quarter. Even struggling Kellogg gave shareholders 3 cents more than last year. Colgate's payout ratio is 10 percentage points higher than it was a decade ago. Theory says dividends do not matter. But the total return of each stock has either matched or trounced the S&P 500 index over the past 10 years.
The second trait at least three of them display this quarter is an ability to leverage strong brands to raise prices. PepsiCo , Colgate and Kellogg are all suffering from rising input costs. But 3.5 per cent higher prices at Colgate, for example, helped organic sales growth jump by the most in seven quarters. PepsiCo managed to push through an even bigger increase in prices. Brands are sometimes intangible mysteries. These companies, however, show how powerful they can be.
A final similarity is also worth pondering. All five companies are global and diversified. This seems like a good thing when Latin America compensates weakness in Europe, say, or when low gas prices make up for higher oil prices. But in general there has not been a concomitant increase in margins or return on equity compared with 20 years ago. Quite the opposite in many cases. It is hard being old too.