A rising USD has affected many companies in terms of erosion of topline growth. Big conglomerates and dividend champions like Johnson & Johnson (JNJ ), which receives approximately 50% of its revenues from outside the U.S., and Apple (AAPL ), which gets more than 65% of its revenues from outside the U.S. feel the pain of a rising USD.
Apple, Microsoft (MSFT ), IBM (IBM ), Oracle (ORCL ) and Facebook (FB ) combined have seen an erosion of more than $9 billion from their revenues because of a strong dollar.
Below, we take a look at all-American companies: companies that sell only in America, have their revenues denominated only in USD. This could be a potential hedge for investors trying to protect themselves from currency headwinds.
TSCO {% dividend TSCO %}
Tractor Supply is a large retail chain of stores offering products for home improvement, agriculture, lawn maintenance, livestock and pet care. Livestock and pet products are the two sources that add the most to the company’s revenue. The products they offer make it evident that the focus of the company is on the rural lifestyle in the U.S. To have a rural lifestyle company that sells only in the U.S. in one’s portfolio would make for great diversification.
Relative Strength – TSCO is currently down 6% from its 52-week high and has displayed extremely strong price performance post Brexit.
Yield Attractiveness – Not yielding a lot, TSCO delivers a yield of 1.04%. TSCO has now raised its dividend for 5 years in a row.
Dividend Reliability – TSCO has a history of paying quarterly dividends since 2011 (not a huge dividend-paying history).
Dividend Uptrend – The payout ratio of TSCO based on 2016 earnings estimates is only 27%, which leaves plenty of room for the company to keep growing its dividend.
Earnings Growth – Analysts expect 2016 earnings estimates to come at $3.46 and 2017 EPS estimates to come in at $3.97, which comes to a solid double-digit growth estimate of 14.74%.
FLO {% dividend FLO %}
Headquartered in Thomasville, Ga., Flowers Foods is a leading producer and marketer of packaged bakery foods in the United States. The company operates 47 highly-efficient bakeries that produce breads, buns, rolls, snack cakes and pastries, which are distributed fresh to retail and foodservice customers through a network of independent distributors, and frozen to national retail and foodservice customers. Their main product is bread – a staple diet of Americans – thus, the company can be categorized as “a recession-proof company”. Revenue and profits increased even during the 2007-2008 recession. FLO has a history of paying quarterly dividends since 2000.
Relative Strength – FLO scores very poorly on relative strength, as it’s down 34% from its 52-week high.
Yield Attractiveness – After a massive share price drop since last one year, the yield is now looking attractive at 3.44%.
Dividend Reliability – Flower Foods has consistently raised its dividend for 10 years in a row. Its annualized dividend growth in the last 5 years has been 19.8%.
Dividend Uptrend – FLO has a considerably high payout of 62% based upon 2016 earnings estimates, which means that it’s retaining less earnings to grow.
Earnings Growth – The company is expected to give a 12% growth in earnings per share from $1.02 to $1.15 in FY2017.
JBHT {% dividend JBHT %}
J.B. Hunt provides surface transportation and logistics services in the U.S., Canada and Mexico. Trucking moves 70% of all tonnage transported domestically. Approximately 60% of the company’s revenues and 75% of its profits come from the intermodal part of its business. The company has a dividend-paying history right from 1988. For further analysis, check out this article on how to analyze transportation stocks.
Relative Strength – JBHT has been down more than 12% from its 52-week high and, hence, scores poorly on DARS.
Yield Attractiveness – Yielding just over 1%, this stock yields lower than the market and the industry average. Nevertheless, the company has shown a strong intent to keep raising its dividend. They have increased their dividend for 12 years in a row now.
Dividend Reliability – Payout ratio of 21% leaves plenty of room for the company to grow its dividend. Such low payout ratios are seen in companies that usually initiate a dividend and not ones that already have given 12 years of growth.
Dividend Uptrend – The stock seems fairly valued at 19 P/E given their expected double-digit growth in earnings and a stellar dividend paying record.
Earnings Growth – JBHT is expected to give an earnings growth of 12.75% in FY2017. Their FY2016 earnings estimates have come in at $4, while their 2017 earnings estimates have come in at $4.51.
ETF Option
An ETF that you may want to consider is the WisdomTree Strong Dollar US Equity Fund. It seeks to track the investment results of American companies while maximizing exposure to companies with significant revenue from within the U.S.
The Bottom Line
For those investors who want a pure play on American companies that have little to no exposure to currency wars, and want to avoid export risk and believe in the domestic growth story, the above companies should all be taken into consideration. Furthermore, the addition of an all-American company can aid in diversifying one’s portfolio.
