Looking for Dependable Dividends? Look to Consumables

When most of us think of consumables, they tend to think of food or beverages. That's logical, as we consume both and need to replace them regularly. But the same goes for a host of paper products as well as other items, including medical supplies. Most investors tend to favor consumables, given the relative price inelasticity associated with the products, as well as their recurring demand nature that combines to drive revenue and cash flow. But there are others out there that currently offer higher dividend yields than those associated with the shares of Hormel Foods , Coca-Cola , PepsiCo , and Kimberly-Clark , which are currently in the 1.9%-3.6% range. Health Care Consumables We have an aging domestic population, and we know that as we age, our bodies tend to require greater medical care. That alone drives a growing demand for the medical consumables market that includes syringes, needles, sutures, staples, packaging, tubing, catheters, medical gloves, gowns, masks, adhesives and sealants for wound dressing and a whole host of other devices and tools used in doctors' offices, hospitals or surgical clinics. We are also dealing with obesity and other weight-related conditions that open the door to many other diseases -- be they diabetes and cardiovascular problems. This is also driving the use of medical consumables in exams, procedures, and surgeries. Per the International Diabetes Federation, the global prevalence of diabetes is expected to increase from 366 million in 2011 to 552 million by 2030. This demand is global in nature and led Grand View Research to forecast a 16.7% compound annual growth rate in the size of the global medical disposables market over the 2020-2027-time frame. And odds are Covid-19 has and will continue to goose demand for medical consumables in the near-term. Another, albeit smaller, driver of medical consumables is the animal health market, which is expected to reach $70 billion in size by 2026 vs. $43.6 billion in 2018. A related consumables market is also found in the dental industry, and expectations there too call for the global dental consumables market to grow to $38.7 billion by 2024, up from $27.9 billion in 2019 due to rising disposable income outside the U.S. as well as rising demand for cosmetic dentistry. Opportunity in Patterson I've been known to say that the further out forecasts such as these go, the greater the probability that they are off to some degree. To me, it's the growth profile that matters, and putting all three of those markets together points to a favorable tailwind for companies whose businesses that serve those consumable markets. Adding a dividend screen on top of that turns up Patterson Companies , which recently announced its latest $0.26 per share quarterly dividend that will be paid on July 31 to shareholders of record on July 17. At the current share price, the annualized dividend offers a yield of 5.1%, well above those I mentioned earlier. If there was one drawback to note, it would be that Patterson hasn't increased its quarterly dividend since early 2017, and even before that, it did so on a sporadic basis. In short, the company is nowhere near being considered a Dividend Contender, but the current dividend yield signals PDCO shares are cheap relative to their growth profile over the coming years. (PEP is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells this stock? Learn more now.)

Looking for Dependable Dividends? Look to Consumables

This area of investing is much larger than just food and drinks and includes health care products of all sorts -- including Patterson Companies.

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