3 Companies That Should Benefit From The New Initiative In Africa
The Obama Administration's announcement of billions in funding for Africa will benefit companies in the consumer sector such as Unilever (NYSE: UL), Johnson & Johnson (NYSE: JNJ) and McDonald's (NYSE: MCD) first.
The aid is an interesting development for Africa, as major oil companies such as Occidental Petroleum (NYSE: OXY) and Royal Dutch Shell (NYSE: RDS-A) are selling off assets, divesting from Africa. The $33 billion in commitments announced by The Obama Administration, however, will counter that impact and engender consumer demand by growing Africa's middle class.
Unilever, Johnson & Johnson and McDonald's are ideally placed to benefit from such growth.
Growing Middle Class Consumption
Unilever is a British personal products company with operations around the world. Its goods range from Dove soap bars to Lipton ice tea. The burgeoning middle class in Africa will consume more Unilever goods. It has a stunningly high return on equity of more than 70 percent. Making it even more attractive is its dividend yield of 3.60 percent.
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It is the same story with McDonald's and Johnson & Johnson, too.
Both will benefit from the expanding middle class in Africa. For McDonald's, consumers will spend more on eating out as discretionary income increases. That has certainly been the story for McDonald's around the world. With steady earnings-per-share growth in the 6 to 8 percent range, McDonald's can easily afford its 3.47 percent dividend.
For Johnson & Johnson and its line of health care and personal products, a growing African middle class will also mean more sales.
Health care spending always increases as a nation becomes more affluent. For Johnson & Johnson, that means products such as Tylenol, Sudafed and personal care products such as shampoos. Like McDonald's and Unilever, Johnson & Johnson has an above-average dividend yield of 2.78 percent.
When the tensions ease in Africa, oil companies like Occidental Petroleum and Royal Dutch Shell will return, as the continent is resource-rich. Before that, however, Unilever, McDonald's and Johnson & Johnson will prosper from the increasing demands of the expanding consumer class in Africa.
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