3 High-Yield, High-Return, Low-Beta Consumer Stocks for the Long Term

NEW YORK (TheStreet) -- One of the basic fundamentals of investing is the risk/return ratio. The riskier the asset, the higher the potential returns. But, as I wrote in Low Risk, High Returns, research by Russell Investments found the most stable, or least risky, stocks had the highest long-term returns.

Clorox (CLX), Unilever (UN) and Kimberly-Clark (KMB) are three such publicly traded companies, all giants in the consumer sector.

Their products are extremely familiar. For Clorox, there are Glad plastic bags and the eponymous detergent, among many others. Unilever markets items all over the globe, from ramen noodles to Dove soap. The personal care products of Kimberly-Clark such as Kleenex are sold around the world in more than 175 countries.

Based on the return on equity, all do it very well.

According to Warren Buffett biographer Carol Loomis, this is one of his most important indicators. In an interview with the American Association of Individual Investors, she stated that "a company capable of producing a good return on equity and doing it consistently is the kind of company you want to be in. It's just a good marker to see what kind of company it is. A company with a standard balance sheet that can make 20% return on equity is a jewel."

Clorox, Unilever and Kimberly-Clark are all jewels in the crown of high returns on equity.

Kimberly-Clark has a return on equity of 39.90%. For Unilever, it is 65%. The return on equity for Clorox is well into the triple digits.

With such a strong performance, there is no reason for a shareholder to sell.

That is why the beta for each is so low. Beta measures how much the price of an asset moves up and down in relation to its market as a whole, which is 1. The lower the beta, the more stable the asset.

The beta for Kimberley-Clark is 0.34. Clorox's beta is 0.45. For Unilever, it is 0.80.

In addition to having a low beta and high return on equity, Clorox, Unilever and Kimberly-Clark pay above-average dividends to shareholders.

At present, the average dividend for a member of the S&P 500 is just under 1.9%. The dividend yield for Kimberly-Clark is 3.12%, well over 50% higher than the S&P average. For Clorox, it is 3.14%. Unilever has a dividend yield of 3.65%.

High-dividend, high-return, low-beta stocks such as Clorox, Unilever and Kimberly-Clark should continue to reward long-term investors. As the low beta shows, those owning the stocks are very satisfied with the performance and have little reason to sell. Based on return on equity, that should continue into the future.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Yates has written for numerous publications including Newsweek and The Washington Post. He is a former general counsel for a publicly traded corporation. Much of his career was spent working on Capitol Hill for Members of Congress in both the House and Senate. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.

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