3: Wal-Mart Stores, Inc. (NYSE:WMT)
Percent of Bill Gates’ Portfolio: 4.5%
Dividend Yield: 2.9% Forward P/E Ratio: 16.5x (as of 11/18/16)
Sector: Consumer Discretionary Industry: Supermarkets
As the largest brick-and-mortar retailer in the world, Wal-Mart Stores, Inc. (NYSE:WMT) hardly needs an introduction. The company’s general merchandise stores serve more than 260 million customers. Wal-Mart’s largest product categories are grocery (56% of U.S. sales), health & wellness (11%), and entertainment (10%).
Wal-Mart has over 11,000 stores located across 27 countries and generates about 40% of its sales outside of the U.S. with Mexico, Latin America, and Brazil accounting for the majority of its international business.
Wal-Mart’s moat is driven by the company’s sheer size. With more than $480 billion in sales last fiscal year, Wal-Mart has the purchasing power necessary to be the genuine price leader in many merchandise categories. Few companies will be able to compete with Wal-Mart’s scale in the brick-and-mortar space.
Wal-Mart’s ability to manage its large size is another advantage. With millions of SKUs and operations spanning the globe, finding qualified suppliers and sourcing its products are no small feats. The company’s strategically located distribution facilities and supply chain know-how give it an edge.
The company’s brand recognition is another competitive advantage. Consumers associate Wal-Mart with value and are likely located within a reasonable distance of one of the companies’ stores.
Conservative investors can also appreciate the non-discretionary mix of Wal-Mart’s business. Grocery items account for the majority of Wal-Mart’s sales in the U.S., which helped the company power through the last recession (sales and earnings grew each year).
Wal-Mart Stores, Inc. (NYSE:WMT) has increased its dividend for more than 40 consecutive years to approach Dividend King status, but the business has seen its dividend growth rate slow to a low-single digit pace in recent years. The company is currently dealing with earnings growth challenges resulting from increased e-commerce competition and rising labor and healthcare costs.
Read More: Wal-Mart Dividend Stock Analysis
6: Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF)
Percent of Bill Gates’ Portfolio: 2.5%
Dividend Yield: 2.8% Forward P/E Ratio: 19.5x (as of 11/18/16)
Sector: Consumer Staples Industry: Soft Drinks
Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF) began operations in 1890 and is the largest franchised company bottling Coca-Cola products. The company bottles more than 100 brands of beverages and serves over 350 million consumers. Sparkling beverages account for close to 80% of total volume.
Coca-Cola FEMSA primarily operates in Latin America and Southeast Asia and accounts for one of every eight Coca-Cola products sold around the world. Coca-Cola (KO) owns approximately 28% of the company.
Coca-Cola FEMSA was likely an attractive investment for Bill & Melinda Gates Foundation Trust because it is clearly a durable business with more than 125 years of operating history. The company benefits from selling Coca-Cola branded products and is an essential partner for Coke.
As the largest bottler, Coca-Cola FEMSA has the necessary economies of scale to efficiently produce and distribute beverages for Coke.
The company’s geographic footprint also offers one of the most attractive growth opportunities in the beverage industry because of its concentration in developing economies.
As consumption rises across Mexico and Latin America, Coca-Cola FEMSA’s volumes should rise. Additionally, bottling operations will likely continue to consolidate to make them more productive, providing further opportunities for volume growth.
Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF) has paid dividends for more than 20 years and increased its dividend by approximately 11% per year over the company’s last five fiscal years.
With a healthy free cash flow payout ratio near 50%, consistent free cash flow generation, and a reasonable balance sheet, the company’s dividend appears to be safe with room to grow.