This post is the second part of a three-part series. If My 2 1/2 Year-Old Son Could Buy Stocks was penned about 19 months ago when my boy was cracking us up every day with his love for doors, train cars, elevators, and socks.
Now it’s my first daughter‘s turn. We describe her as bossy, girly, vivacious, loquacious, and voracious. She’s also known as the Toy Czar in our house. She makes the rules. If you’re playing with a toy she wants, better go find another.
Her personality is infectious, and she is so girly it terrifies me. The other day my wife gave her a choice of two pairs of underwear. Blue stripes and pink (“pinky fruity”). She slapped the blue pair away and ran off with the pink ones, only to wet them ten minutes later (not ready for the potty yet).
She’s been known to push around kids twice her age in the church nursery and often bullies our four-year-old son into letting her brush her teeth first.
She eats every meal as if she’s carbo-packing for a marathon.
A funny thing about parenting is watching kids develop interests. Between age 2 and 2 1/2, interests flourish. Some of hers have me looking into the stocks behind them.
At first light every morning, we hear pterodactyl-like sounds coming from our daughter’s room. Somebody’s hungry. Before we can lift her out the crib, she insists on putting in a hair bow.
“Daddy, where’s my bow”? Her blonde hair is curly and all over the place. Without a bow or hair band of some kind, she’s constantly swiping hair out of her face and meals. Pink bows are preferred. But she has an entire arsenal of hair accessories to keep it tidy. Dad is still learning to do a pony tail, but I prefer the easy alligator clip bows that do the job with little effort.
Goody is the number one brand for hair accessories. Bands, bows, brushes, barrettes, bobby pins, “ouchless” elastics… you name it, they make it. These are low production cost, inexpensive and disposable pieces of plastic and rubber junk that end up scattered in every corner of the house, destroying my vacuum. Girls go through a lot of them, and Goody keeps cranking them out.
The parent company of Goody is Newell Rubbermaid (NWL). This Atlanta based company may sound half-familiar, though Newell and Rubbermaid merged way back in 1999. Some of the company’s best known brands include Elmer’s Glue, Sharpie Permanent Markers,Graco (baby products), Calphalon, and Vise-Grip Locking Pliers.
Another Newell brand, and a favorite of my daughter is Baby Jogger. Don’t worry, I’m not a crazy stroller-running-Dad. Baby Jogger makes the ubiquitous City Mini, a damn versatile suburban mover.
As of this writing, Newell Rubbermaid has a market cap of 20 billion, a forward P/E ratio of 15 and a dividend yield of 1.71%, which is just below its five-year average. It’s a recent addition to the dripinvesting.org Dividend CCC list with a five-year dividend growth streak.
My girl loves balloons. When she gets one, she defends it with ferocity. Balloon making must be a great business. I can’t imagine those things cost much to produce, aside from image licensing. And they’re a great value for parents. $5 gets you a few weeks of distractions, although they often lead to fights in our house. My one rule: if it stops floating, I throw it away.
What good is a balloon without helium? One great business my daughter would surely add to her portfolio is Air Products (APD). Air Products is a chemical company specializing in producing various gases and air related equipment. The Allentown, PA based company has paid and raised its dividend for each of the last 34 years.
Air Products came in at #10 of my worst investing mistakes that I wrote about a while back (when the stock was trading at $110). Almost ten years ago, I sold the stock at $68.12 for a quick gain when I was still a trigger-happy investor. Today, the stock trades at $136. But the real bummer is the 9.9% annual dividend growth over that time, and $22 of dividends I missed.
All Things Disney
What two-year-old girl doesn’t love everything Disney (DIS). Our family owns the stock and the DVDs, the junky plastic dress-up toys, the Frozen underwear pack,the Minnie Mouse sippy cups,the Minnie backpack,a few dozen stuffed Micky and Pooh characters, the Minnie and Daisy Duck tea party set, the Monster’s Inc book… there’s no end to this list.
Only for our kids will parents and grandparents continuously by crap that is destined for the garbage can. But that short period of joy our kids experience from these toys is worth it.
My kids haven’t reached movie-going age yet. But I’m sure when the next Nemo and next Star Wars films are out, they will be. Of course, they’ll need the action figures and underwear too.
And not only are we giving our money on Disney today, we’ll be required to go on both a Disney cruise and a full-on trip to Disney World someday in the future.
I calculate we’ll visit Disney World at the perfect age, when our kids will enjoy it the most. This should coincide with the most ungrateful years of their lives.
I love my daughter and will give her these Disney toys, princess dance shoes, and trips of a lifetime. But it feels like entrapment. Disney is that good a company.
One way to feel less strangled is to buy Disney stock. I’ve been dollar cost averaging into Disney stock for almost two years now. Though the dividend yield is only 1.37%, the real opportunity is the hedge against a lifetime of spending on Disney stuff.
If I continue to buy Disney stock from now until my youngest goes to college, perhaps the dividends received for the balance of my life will cover the total cost of Disney stuff we bought. Doubtful.
Disney’s most recent market cap is $170 billion, and I believe it’s worth every bit of that. The five-year dividend growth rate is a whopping 31%.
The movie and merchandising pipeline, with Star Wars, Marvel Comics, Pixar, and so many other beloved characters, paired with amusements of so many kinds, puts a stranglehold on American families. That’s the kind of business me and my daughter want to own.
Nothing makes my daughter happier than putting on her dance dress and shoes for Friday morning dance class. Both are pink, of course. And the dress is more tacky than cute. But wow, she is radiant when she wears it.
I expect we’ll be buying a few more leotards for her as she grows from a plump little twirly girl to a graceful beauty.
Danskin is a top provider of tights, leotards and tutus. That’s just one of the many brands of Iconix Brands (ICON), a clothing brand management company.
Other household brands include Joe Boxer, London Fog, Mossimo, Ocean Pacific/OP, Starter, Zoo York, Sharper Image, Umbro, Strawberry Shortcake, Ed Hardy, and PONY brands.
The company has a market cap of around $400 million. That’s low due to a heavy debt load. A quick look at the key stats tells me this is not one I’d recommend to my daughter. They don’t pay a dividend, for starters, and 39% of shares are sold short. Too much debt and risk for me.
Perhaps there’s some kind of speculative play on this stock, but one look turns me off quickly. Now if I can just teach my daughter to look past her investment biases.
Don’t mess with my girl at meal time. She can become volatile at any of her six meals a day. But the first is especially risky. She wakes up hungry. Better have the right cereal on hand.
Each and every morning starts with a breakfast of multiple bowls of cereal, though half of the contents end up on the floor or dried up in her hair. She likes Cheerios, Cascadian Farms Cinnamon Squares, Panda Puffs, “Monkey Munch”,and Dad’s Cereal(minus the nuts).
If it weren’t for cereal, she wouldn’t consume milk at all, so we’re thankful for that.
As an investor, her best bet would be General Mills (GIS). As a diversified packaged foods company, General Mills covers a lot of my daughter’s favorites. Yogurt, ice cream, granola bars, and the most desired commodity in our household, crackers.
I’ve owned 70 shares of General Mills since 2014, in at around $50/share. General Mills has a dividend growth streak of increasing dividends for the past 13 years, with an average increase of 10%. But the real story is the consistent dividend payment for the last 117 years without reduction.
For a company this old, you’d expect a higher value. But the market cap is only $36 billion. While the stock yields greater than 3%, the dividend payout ratio has creeped up above 70%, and the forward PE ratio is around 20. So value and dividend investors aren’t getting too excited these days. Nowhere near as excited as my daughter is when I pour her a bowl.
The first time my son pooped on the potty we celebrated with a trip to get ice cream. My daughters both get the same deal.
Another ice cream worthy celebration will be the day each kid understands compound interest. We’re still years away from that, and I wonder if they’ll pay attention if not for the ice cream. Hopefully they will. Kids born today have a decent chance of living to age 100. So to understand the power of investing and anatocism at a young age will create enormous wealth for those who have seen the light. Maybe someday my daughter will read this nerdy post and take note.