Mondelez: Steady Appreciation And Strong Dividend Growth (NASDAQ:MDLZ)

When it comes to making money in the stock market, it can frequently pay to take a long-term view. One of the factors that can impact a person’s willingness to stick with a long-term program is volatility. The stock market is volatile. Some years it is up. Some years it is up a lot. In other years. the market can crash. However, purchasing a few consumer stocks that are popular can be one way to avoid getting caught up in the belief that the sky is falling. These companies are not likely to rapidly increase in share price like hot tech stocks, yet they’re prone to perform better when recessions hit.

One such stock is Mondelez International (NASDAQ:MDLZ). This company sells many brands that are popular with consumers. These include Oreo, Chips Ahoy, and Belvita, along with brands that are more popular outside the US, such as TUC. Because of the large stable of popular name brands, Mondelez has pricing power in inflationary environments such as the one experienced over the past couple of years. Consumers are likely to continue buying their products because of their popularity, at least as long as price increases are not well above the rate of inflation.

Financials

When looking at the most recent annual report, along with recent sales figures, there is room for quite a bit of optimism. For about five years in a row between 2016 and 2020, revenue was stable around $26 billion per year, give or take a few hundred million. This number started to increase in 2021, and over the past four quarterly reports, the top-line revenue number has exceeded $35 billion, showing growth which is well in excess of the rate of inflation. The most recent quarterly report showed that the first three quarters of 2023 had $3.9 billion in additional revenue, a growth rate in organic net revenue of a healthy 17%.

When looking at the gross profit, this number has grown 20% on a year-over-year basis and is up $1.7 billion for the first nine months of the year. Revenue in developed markets was up 13.5% and 22.5% in developing markets, which are more likely to be opportunities for future sales growth. While net income was down for FY22 at $2.717 billion, the most recent quarterly report showed a net income that’s nearly doubled on a year-over-year basis from $2.142 billion in the first nine months of 2022 to $4.018 billion over the same period in 2023. As a result, EPS has nearly doubled, as well, from $1.54 in the first nine months of 2022 to $2.92 in the first nine months of 2023.

Total liabilities, including long-term debt, have increased somewhat over the past five and ten years, but not at a rate that has exceeded revenue and income numbers. For example, the 2013 annual report showed just under $40 billion in liabilities, including nearly $14.5 billion in long-term debt. The most recent quarterly report listed $42.3 billion in total liabilities and $16.4 billion in long-term debt. Current liabilities are up about $4.6 billion over the same time.

The most recent quarterly report showed free cash flow of $2.4 billion, which has grown by $0.5 billion over the past year. Overall, the finances of Mondelez appear to be strong.

MDLZ currently trades at about 22.4 times earnings. This is actually in line with where the company has traded over the past five years. The PE dropped to 15.76 for a short period in March 2020 when the pandemic fear gripped the market. Just before and just after this very short crash, the multiple was in the 20 to 21 range. Over the past five years, the company has averaged a PE ratio of 23.16. Yet, over this time the stock has still provided a solid return of 74% in terms of price appreciation. This would indicate a decent valuation, although investors might wait for a short-term drop to initiate a position.

Shareholder Returns

Over the past year, MDLZ stock is up a healthy 16.72%, which lags the 21.83% return of the S&P 500 (SPY), as of January 26, 2023. Over the past 10 years, shares have returned 129.85% overall, a CAGR of about 8.7%. This is a fairly strong share appreciation, albeit much smaller than the returns of some tech stocks like Tesla (TSLA) and Apple (AAPL). The current dividend yield for Mondelez is 2.28%. While this is not really a high dividend yield, it is quite a bit higher than the 1.42% investors in an S&P 500 fund might expect to draw. Also, when added to the 8.7% price appreciation, this would give a total return of nearly 11% per year, which is not bad. Again, not as high as some high-flying tech stocks, but still a healthy return. Over the past five years, the yield has occasionally dropped below 2%, but it has been above that level for the majority of that time, so investors would have generally come close to 11% for an average annual return.

The dividend growth has been strong for MDLZ over the past five years, coming in at an average of 11% per year (keep in mind that some years will have higher growth, while others will have lower growth; this is an…