Mondelez International: A Sweet Treat for Dividend Income and Growth
In the stock market, investors can capitalize on favorable disconnects between market sentiment and company fundamentals. Emotional factors can often cloud the judgment of market participants, leading to undervalued opportunities.
Mondelez’s Solid Foundation
Mondelez International (MDLZ) is a leading global player in the consumer staples sector, boasting a dominant position in categories worth nearly $350 billion annually. Its iconic brands, such as Oreo, Cadbury, and Nabisco, continue to resonate with consumers, evidenced by the company’s consistent market share gains.
Despite rising commodity prices, Mondelez has successfully implemented pricing increases, maintaining strong revenue growth. Additionally, the company’s focus on non-discretionary snack and comfort foods has insulated it from significant volume declines even amidst inflationary pressures.
Dividend Strength
MDLZ’s dividend is a major attraction. While the forward yield of 2.5% may seem uninspiring, the dividend is well-supported by a low payout ratio, a strong balance sheet with a BBB credit rating, and a high likelihood of continued dividend growth.
Valuation and Growth Prospects
MDLZ’s valuation is currently below its historical P/E ratio of 22. Based on analyst consensus, the stock has the potential to deliver a total return of over 12% annually in the coming years. This includes a 2.5% dividend yield, an 8.6% earnings growth rate, and a 1.4% annual valuation multiple expansion.
Risks to Consider
As with any investment, there are risks associated with MDLZ. These include potential adverse impacts from commodity cost changes, labor union negotiations, and changes in consumer preferences.
Conclusion
Mondelez International is a dividend growth gem with a solid foundation, strong growth prospects, and a compelling valuation. Its investment-grade balance sheet and robust cash flows support the company’s dividend and provide a cushion against potential headwinds. Investors seeking a combination of income, growth, and downside protection should consider adding MDLZ to their portfolios.
