Feeling a bit worn out by the market's manic moves in the past couple of years? Had enough of companies that issue earnings warnings and then plunge 20%, 30% or more? If so, consider looking in some less-hyped sectors for relatively steady companies that have a solid track record of earnings growth and shareholder returns. The ten stocks we list in this article are one place to start.
These companies were largely suggested by Fool staff and are not the result of a pure "screen," though they are all businesses with at least nine years of solid earnings growth. They do not constitute "buy" recommendations or anything close to that -- some of these companies may do well over the next few years, some may not. Several are richly valued.
Basically, the following companies have demonstrated impressive earnings consistency over time and usually have had a correspondingly stable share price. As always, consider this a beginning, not an end, to your homework. The companies are presented in alphabetical order. Prices were taken from market close on March 6, 2001.
The leading U.S. provider of supplemental health and life insurance through the workplace, AFLAC sells insurance for situations not usually covered by basic health plans, such as short-term disability, cancer expenses, and long-term care. The company also sells life insurance. AFLAC -- the one with a duck in its commercials -- is also the leading foreign insurer in Japan, covering one in four Japanese.
According to the company's investor fact sheet, AFLAC has "increased operating earnings per share [EPS] at an average annual rate of 18.3%" for the past nine years, though that excludes the effect of exchange rates, which are a factor given that Japanese sales account for about 80% of the business. AFLAC has increased operating EPS by at least 10% every year, save one, since 1991. Last year, the company recorded $9.7 billion in sales, and $657 million in operating earnings, a 20.5% increase over 1999.
The company has succeeded in recent years despite Japan's troubled economy, and doesn't seem worried about recession talk in the U.S. In mid-February, AFLAC reaffirmed its earlier guidance of 15% to 17% growth in operating EPS for 2001, excluding the effect of currency fluctuations.
Including reinvested dividends, AFLAC's shares have returned 31.8% annually over the past ten years (All ten-year periods ending Feb. 28, 2001). The company currently trades at about 23x estimated 2001 EPS of $2.74.
The largest brewer in the world, Anheuser Busch is an excellent example of an omnipresent consumer products company that also has been a solid investment. The family-owned firm has about 50% of the U.S. beer market, thanks to brands such as its flagship Budweiser and Bud Lite beers, as well as Busch, Michelob, and O'Doul's. Anheuser also operates Busch Gardens, Sea World, and seven other theme parks. While no company is "recession-proof," Anheuser-Busch does produce a product that many people want, year-in, year-out.
Certainly, "BUD" is not a hyper-growth company, but it has increased earnings per share (EPS) by a respectable 9% annually over the past ten years. More recently, the company completed its ninth consecutive quarter of double-digit EPS growth. Meanwhile, its shares have returned 16.8% over the past decade, with dividends reinvested.
Automatic Data Processing
The world's largest payroll service provider, and a FOOL 50 component, ADP provides payroll, human resources, benefits administration, and tax reporting services to employers. The company also offers securities clearing services and provides insurance companies with "claims management solutions."
ADP practically defines reliability: it has reported 158 consecutive quarters -- over 39 years -- of record quarterly revenues and earnings. It has grown EPS at a compound rate of 13.5% over the past ten years. Meanwhile, shares of ADP have returned an average of 22.35% annually for the past decade, with dividends reinvested.
ADP's smaller competitor Paychex
Ever wonder which companies are behind the millions of electronic financial transactions that take place every day? One of them is Concord EFS, which provides transaction processing services to grocery stores, retailers such as Wal-Mart, gas stations, and other merchants. The company also provides ATM services, and operates the MAC ATM network. Last year, Concord processed 5.3 billion transactions.
Concord has posted twelve consecutive years of record earnings. Moreover, the company has grown EPS at an impressive average annual rate of 35.6% in the past ten years. Concord is smaller than most of the other companies listed here, recording $1.23 billion in revenue last year, and $187.5 million in net income. The company also carries a premium, with shares recently trading at $47.56, about 40x fiscal 2001 estimated EPS of $1.17.
Concord's shares have returned 42.5% annually over the last decade. Within that number, however, there is a bit of lumpiness. The company's shares lost 9% in 1999, but zoomed upwards 67% in last year's tough environment.
Formerly known as the Federal National Mortgage Loan Association, Fannie Mae buys home mortgages from banks and other lenders and either holds them or repackages them as securities, thereby ensuring liquidity in the mortgage market and encouraging financial companies to issue mortgage loans. The company makes money by borrowing at a lower interest rate than its competitors, thanks to its perceived government backing, and then uses the borrowed funds to purchase mortgages that pay a higher rate of interest than Fannie Mae pays on its debt. The company generally maintains about a 1% "spread" between these two rates.
Fannie Mae has increased net income for 14 years in a row, and boasts a 14.4% compound EPS growth rate over the last ten years. The company raked in $4.5 billion in earnings last year. Investors may also want to check out Freddie Mac
There is some uncertainty surrounding Fannie Mae, however, due to efforts by the company's rivals to eliminate some or all the advantages it enjoys as a result of its government charter. These include an exclusion from some state and local taxes and its exemption from SEC filing requirements.
Nevertheless, after dipping about 14% in 1999, the company rebounded with a 41.5% jump (including dividends) last year. Over the past ten years, the company has returned an average of 24.2% to its shareholders.