5 States With the Lowest Median Household Income

Yesterday we took a closer look at the five states in the U.S. that boast the highest median household income. The entire reason for this deeper dive into the nation's five highest-income states was to give us a potentially fresh angle to look at, in a literal sense, "where the money is going." By focusing on states that bring in the highest household income, we were able to identify a few companies that have a strong presence in those states and could stand to benefit from those higher income levels.

Today, we're going to turn the tables and look at the five states with the lowest median household income. Like before, identifying these states and the businesses that may have a disproportionate amount of operations in these states could give us early clues as to what companies might benefit from a most cost-conscious consumer or struggle moving forward. Consider this another innovative attempt to think outside of the box and stay ahead of Wall Street analysts.

Here are the nation's five states with the lowest median household income based on a three-year average, according to the U.S. Census Bureau:

State

Median Household Income (three-year average)

Mississippi

$39,592

Arkansas

$40,606

Louisiana

$40,660

Kentucky

$41,687

Tennessee

$42,266

Source: U.S. Census Bureau.

Similar to what we saw yesterday from the top-ranking regions, the lowest median household income states are generally clustered -- in this case, around the south-central U.S. Understand that this doesn't make these regions bad for business, as the cost of living is considerably lower here than in New England or on the West Coast. However, retailers and other businesses do have to understand that there could be much less for households to work with in the way of disposable cash in these states, so they should plan expansions and consumer targeting accordingly.

With that in mind, let's have a look at a few of the businesses that may thrive or find the going tough because of their concentration in these aforementioned five states.

Wal-Mart (NYSE: WMT  ) has a diverse presence throughout the U.S. but a particularly strong position in the five states with the lowest median household income. Of the roughly 4,700 retail locations (including Sam's Club) throughout the U.S., Wal-Mart's corporate website shows that 516 were located within these five states as of the end of July. Wal-Mart makes a living by luring in cost-conscious shoppers, which is a smart strategy when you're operating in states with the lowest average take-home pay. Clearly, there are a lot of other factors at work for Wal-Mart, but I would consider it one of the bigger beneficiaries within this region.

On the flip side, a retailer that could struggle because of its reliance on lower-income states is Dillard's (NYSE: DDS  ) , which maintains no presence in New England or the Pacific Northwest. Instead, Dillard's 283 department stores and 18 clearance centers are located mostly in the Central, South Central, and Southeastern United States. According to its corporate website, 46 of those 301 cumulative locations are in the five lowest median household income states. Simply put, it won't take much of a slowdown in the economy to really impact the pocketbooks of these consumers and potentially put Dillard's in a bind.

Finally, one trend I've certainly witnessed as a Foolish health care contributor is that the South and South Central U.S. often have a higher rate of obesity and other weight-related ailments than any other region of the country. What this means is that cost-constrained consumers in these regions are relying more on fast food from companies such as Yum! Brands (NYSE: YUM  ) and McDonald's (NYSE: MCD  )  than on more nutritious foods.

McDonald's and Yum! -- which operates Taco Bell, Kentucky Fried Chicken, and Pizza Hut -- have sought to offer consumers more nutritious options, with Yum! introducing grilled chicken as an option in its KFC stores in 2009 and McDonald's offering salads and snack wraps for years. Still, with income limiting individuals and families' options in these regions, these two companies could continue to see strong results in these states regardless of what's on the menu.

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