Another Mother's Day came and went yesterday, and moms everywhere were showered with tokens of love, affection, and gratitude. Of course, some of those tokens were a little more elaborate than others.
While the creative among us have little trouble finding that perfect gift to express our sentiments, the procrastinators tend to show up at the last second with a simple greeting card and a wilted flower bouquet just picked up a few minutes earlier.
Unfortunately, I typically fall into the latter camp, and have been there for more years than I'd like to admit. Fortunately, my mom, like most, is thrilled just to be paid a visit and will graciously accept any gift, regardless of the quality.
Nevertheless, I think many of us would do well to start planning ahead of time for Mother's Day 2006. To avoid being embarrassed again next year, I'm planning to get a very early head start this time -- beginning today, to be exact. In fact, I've already narrowed my search. I've ruled out flowers, which quickly fade, and chocolate, which disappears even quicker.
Surprise! It's a stock!
Why not consider a stock or two for next Mother's Day? I know, some think a stock certificate is a tad impersonal for the occasion. Nonsense. What better way to express your appreciation for everything mom does year-round than with a stake in a company whose products or services she likes?
Plus, those that made my final cut all come with an added benefit that every mom can appreciate, regardless of her particular taste: cash dividends. Not to mention that stocks are easy to wrap, last for years, and remove all worries over not getting the right size or color. Still, should she decide to return it, there's no need for a receipt, and with any luck she'll get back even more than the sticker price.
With that in mind, using fairly straightforward criteria, I narrowed the field down to a handful of prospective candidates. First and foremost, I scouted around for companies whose products are likely to be aligned with moms' interests. Admittedly, this isn't the most stringent screen, but do you really want to end up giving your mother shares in a company like Waste Management? I'm sure it's a fine firm, but receiving stock in a trash collector probably won't be at the top of too many wish lists.
Of the companies that cleared the first hurdle, I focused exclusively on those with a respectable dividend yield. Mom works hard 365 days a year, so my search only included companies that would reward her with cash payments throughout the year. After all, dividend-paying S&P companies have outperformed their stingier cash-hoarding counterparts by a remarkable 2.7% annually over the last 25 years. This prerequisite ruled out otherwise mom-friendly picks such as Bed, Bath, and Beyond.
Finally, by targeting only those with reasonable valuations and solid, double-digit growth prospects, I arrived at a select group of finalists representing sweets, jewelry, shopping, and relaxation:
5-Yr Earnings Growth
Indulge her sweet tooth
I'm fairly sure that Hershey needs no introduction. Most everyone knows that the confectionery king dominates the candy industry, particularly chocolate, where it controls nearly half of the market. However, while Hershey products like Reese's, KIT KAT, and Almond Joy may be household names, the company's impressive recent financial performance may come as a surprise to some.
During the last quarter, both sales and earnings climbed by double digits to new record highs. Hershey accomplished this by rolling out new products, making selective acquisitions, expanding margins, and increasing market share.
Hershey has lifted its dividend payments for five consecutive years, in the process raising the annual payout by two-thirds to $0.88 per share. In fact, according to Morningstar, the firm has returned to shareholders every cent it has earned over the past decade in the form of dividends and stock buybacks.
Why buy mom Hershey kisses when you can pick her up some Hershey stock and be the one getting kissed?
Dazzle her with diamonds
Let's face it, for the price of the sales tax that would be charged on anything found in a Tiffany's showcase, you could buy a few shares of the upscale jeweler's stock -- quite a few actually. And while a stack of shares undoubtedly won't elicit the same grin that a little blue box containing a pair of sparkling sapphire earrings might, she'll probably end up thanking you in the long run.
Tiffany arguably owns the most valuable brand name in the industry. It has boosted its dividend payment by 50% over the past few years, and has recently authorized a massive $400 million stock repurchase program -- almost 10% of its outstanding shares. Besides, how often would she actually wear those earrings anyway?
Yes, Tiffany has run into a few problems lately, particularly in Japan (which represents one-quarter of the firm's revenues) where same-store sales fell 8% last year. However, its catalog and online operations continue to generate impressive sales, posting double-digit growth last quarter, despite heated competition in the online realm from Motley Fool Rule Breaker pick Blue Nile
With forays into new jewelry lines, modest expansion plans, and forecasts calling for 12% earnings growth going forward, mom should appreciate anything that carries the Tiffany's name -- with or without the blue box.
Send her on a shopping spree
Wouldn't mom love to own shares in a company that indulges her passion for shopping? Federated is the parent company of some of the most pedigreed department store chains in the industry, including Bloomingdale's and Macy's. The firm has recently done some shopping of its own recently, by acquiring rival May
Federated will have its work cut out for it in turning around operations at the struggling May, but the merger will unite two of the premier names in upscale shopping, creating a retail giant with nearly 1,000 stores operating in 49 states. Together, the two produced nearly $30 billion in sales last year. Traditional department stores face competitive pressures from all levels -- from discounters to specialty retailers -- but Federated has the size, the scale, and the brands to power forward. Last week, the company announced that April same-store sales jumped 2.8%, trouncing expectations and encouraging management to boost its first-quarter earnings outlook by 40%.
Let's not forget, with an enterprise value-to-EBITDA ratio of around six, Federated's shares are now on sale. Wouldn't mom be proud?
Pamper her in luxury
Ahh, sunbathing under the warm Caribbean sun, sipping a cool tropical cocktail, gourmet dining under the stars -- next Mother's Day, consider setting sail with Carnival, the world's largest cruise operator.
Leisure travelers are flocking to exotic destinations in record numbers, and many are asking for permission to come aboard one of Carnival's 75 cruise ships. In fact, Carnival's fleet -- which is composed of 12 different cruise lines -- carried more than 6 million passengers last year to ports of call in the Caribbean, the Mediterranean, the Mexican Riviera, Alaska, Europe, the South Pacific, and just about anywhere else the seafaring imagination can dream up.
The immense cost of assembling a fleet of luxury liners has prevented would-be competitors from plundering the profits in this consolidated industry, and with an economic moat as wide as an ocean, the top two firms -- Carnival and rival Royal Caribbean
Despite a stiff headwind in the form of rising fuel prices, Carnival continues to plow ahead at full steam. Last quarter, a 15% rise in capacity was quickly soaked up, which, coupled with higher ticket prices, lifted revenues by 21%. That wave of top-line growth helped net income crest 70% above last year's total. More importantly, advance booking for the remainder of the year is tracking well above last year's robust levels.
A rising tide lifts all ships -- and apparently dividends, too. Following a 20% increase just last November, Carnival has recently boosted annual payments by another 33%. With fair weather in the forecast for the industry, give mom a reason to relax.
364 days and counting
OK, so you may not need to rush out and begin shopping for next year already. Then again, why wait until the last minute? Many of us already know what that leads to. Furthermore, buying early has its advantages -- 12 months of dividends and potential capital appreciation.
The group of stocks above is certainly not all-inclusive, so if none of the four companies listed sounds like a good fit for your mom, the market has an almost-endless variety of choices. Better yet, if she is the catalog type, why not let her flip through the pages of Motley Fool Income Investor? You will appreciate the convenient, no-hassle shopping, and Mom will love the market-beating performance. And, of course, Father's Day is right around the corner.
Motley Fool Income Investor tirelessly scours the market in search of solid firms with above-average yields. Want to sign mom up for afree trial? Consider it our gift.