Large cap companies, generally defined as companies with a market capitalization in excess of $10 billion, typically possess a solid brand name, fundamentals, income from dividends (in some cases), and competitive positioning which can help fortify your portfolio. The four companies below contain those qualities.
Retailing giant Wal-Mart Stores, Inc. (NYSE:WMT), generally regarded as the local go to place for low priced merchandise, compels people to drive miles past more expensively priced grocery store competitors to shop at Wal-Mart. Two-thirds of the population lives within five miles of a Wal-Mart according to a Reuters’ article.
Wal-Mart Stores, Inc. (NYSE:WMT) also possesses excellent fundamentals for a giant behemoth. Revenue and free cash flow grew 5% and 17%, respectively, over the last year. Its long term debt to equity ratio sits at 47% residing below my personal threshold of 50%.
Wal-Mart currently pays out $1.88 per year per share in dividends, yielding 2.5% as of this writing. Wal-Mart prudently pays out 41% of its free cash flow saving the rest for other forms of capital returns, such as share buybacks and business expansion.
Wal-Mart’s empire of 10,800 stores vastly exceeds the 1,800 stores in the possession of its No. 2 competitor Target Corporation (NYSE:TGT). This will continue to give Wal-Mart Stores, Inc. (NYSE:WMT) the ability to competitively buy and sell products at an ultra-low price ensuring customer loyalty and the demise of its smaller competitors and adding superior shareholder returns in the process.
Beverage giant The Coca-Cola Company (NYSE:KO) conjures up images of its signature trademark cursive white writing on a red can for its flagship product “Coca-Cola” soda. No other company in the world enjoys the brand name recognition of Coca-Cola. Other Coke product lines also enjoy notoriety like Fanta, Sprite, Minute Maid orange juice, and Dasani bottled water.
Coca-Cola continues to enjoy growth to its top and bottom lines despite its large size. In 2012, The Coca-Cola Company (NYSE:KO)’s revenue and free cash flow grew 3% and 20% respectively. Its debt to equity ratio calculates at 44% as of the most recent quarter.
Coca-Cola currently pays out $1.12 per share per year in dividends, translating into a very healthy 2.8% as of this writing. Coca-Cola pays out 57% of its free cash flow in dividends, a little high for my tastes, but all of the positives outlined above outweigh this one negative.
The Coca-Cola Company (NYSE:KO)’s 300 bottling partners give it the distribution power necessary to carry out the logistical miracle of selling its beverages on a global scale. This distribution system in addition to its brand recognition gives this company the uniqueness that will continue to serve its shareholders well with superior shareholder returns.