Philip Morris International (NYSE:PM) is a dream holding for long-term investors, not to mention those interested in deriving a stream of income from dependable dividend payments. Yet in terms of capital appreciation, the global tobacco giant hasn't done any better than the market as a whole, gaining just 10% over the past year.

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Although its plans to introduce a new electronic cigarette into the U.S. market next year that could crush the competition with a reduced-risk designation might cause its stock to take off, there are no guarantees it will be successful. Instead, I'm highlighting today two promising companies that are posting stronger operating trends and have enjoyed soaring stock prices as a result yet offer yields just as tasty as those on the dividend from Philip Morris. Those names are Big 5 Sporting Goods (NASDAQ:BGFV) and Ternium (NYSE:TX).


Philip Morris

Big 5 Sporting Goods






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Data sources: Yahoo! Finance,

Big 5 Sporting Goods

While a rising tide can lift all boats, when it goes back out not all ships will float the same. The sporting-goods retail market is a case in point, as the tough retail environment has brought bankruptcies to a number of stores in the space, including Eastern Mountain Sports, Sports Chalet, and, of course, Sports Authority, while stumbling Cabela's (NYSE:CAB) is being bought out by rival Bass Pro Shops.

That makes the gains at small regional sporting-goods player Big 5 Sporting Goods, whose stock rose 105% over the past 12 months, all the more remarkable, as it seems to have avoided the pitfalls that tripped up its larger rivals. Moreover, not only has it sidestepped their troubles, but it also stands to benefit from them by picking up their customers and business. Its performance translated into strong sales growth, consistently better same-store-sales growth, larger numbers of customer transactions, and higher average tickets, allowing the retailer to reduce by $42.4 million, or 65% from the third quarter last year.

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It is possible the gains will be transient. Dick's Sporting Goods (NYSE:DKS) remains the dominant force in the industry, and it acquired the Sports Authority brand and intellectual property, as well as its share of customers. It operates 675 stores across the U.S., while Big 5 runs 432 stores, primarily in the West.

The question that remains is how long the benefit of industry consolidation will last for Big 5. That it's received more than just a single shot in the arm is clear from its performance thus far, indicating the gains it's already made should hold, while it ought to pick up more points in the future.


South American steel products producer Ternium saw its stock rise 110% in the past 12 months, as steel prices bottomed out, coupled with an increase in raw-material benchmark prices -- particularly metallurgical coal, which is used in steelmaking -- that is supporting international steel prices.

Importantly, North American steel end-user demand remains stable at healthy levels, while Mexican automotive and household appliance industries are steady, offsetting the weakness seen in the construction sector. As Mexico is Ternium's largest market by far, accounting for 63% of total net sales, its economy is going to play an outsize role, which should benefit it going forward.

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According to CEO Daniel Novegil, "The automotive, industrial and home appliances sectors are doing very well and ... will continue, because more plants are moving to Mexico." 

In recent weeks, in particular, the Mexican peso has suffered swings in valuation because of the election of Donald Trump to the presidency, while the devaluation of the Mexican currency against the U.S. dollar beforehand led to "interest rates that have been volatile, affecting expectations in the customer side." But on the whole, Ternium expects Mexico to continue doing very well in the years ahead, because it is becoming more competitive and more productive.

That's borne out by Ternium's results, which showed that despite revenue that fell approximately 5% in the third quarter, its cost of sales fell more, in excess of 20%, so that gross profit increased by 74% and operating income nearly tripled, rising 183% year over year.

It is generating strong free cash flow, so even though the fourth quarter is expected to be appreciably weaker than the third, its payout remains secure.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.