Campbell Soup Beats Earnings, Still Not A Good Investment

If you bought a share of Campbell Soup (CPB) back in 2000, your share would have earned $1.65 in profit and you would have collected $0.90 in dividends. Today, Campbell Soup earns $3.05 in profit and pays out $1.40 per share in cash dividends. This means that over the past sixteen years, earnings have grown by 3.9% annually and dividends have gone up by 2.8% each year.

This is not a business that serves the role of inflation hedge or stable dividend cash generator in a portfolio. It serves in the realm of wealth preservation rather than wealth building. There is value in that–each share paid you $0.88 in 2008 dividends, $1.00 in 2009 dividends, and $1.08 in 2010 dividends. It is a sign of intelligent estate planning to own business interests that not only maintain but grow their cash payout during periods of economic distress.

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Coca-Cola Relies On Smaller Soda Sizes To Boost Profits

In the past three years, global soda consumption is down 12%. And yet, soda-related profits at The Coca-Cola Company (KO) are up 2% overall during this time period. Why have soda profits held steady while people are drinking less and less of it?

The answer is smaller servings. Traditional 12-ounce soda cans that you can get at most grocery stores sell at an average price of 31.5 cents. Meanwhile, the new 7.5-ounce cans that Coca-Cola is aggressively promoting sells at an average price of 40.8 cents. Coca-Cola, which earns 28% net profit margins on its flagship offerings, earns 36.4% net profit on its 7.5-ounce cans.

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