One reason why brand-name operations have done well over the years is that they're the companies that we interact with on a daily basis. When it comes time to invest, it's only natural for us to buy what we know.
It's an approach made famous by Warren Buffett, whose portfolio is filled with popular companies. American Express, Johnson & Johnson, Coca-Cola and Wal-Mart Stores.
"Buffett has always said to buy businesses that you're familiar with," said Kevin Grundy, senior vice president of equity research for Jefferies. "A lot of people can relate to these companies because they've grown up with them in their fridge."
Right alongside Buffett in popularizing this investing approach, though no longer a constant figure in the financial headlines, is Peter Lynch, famed manager of the Fidelity Magellan fund. During Lynch's heyday—when Magellan was the biggest and best-performing mutual fund—he popularized the concept of investing in brands he came across in his everyday life and came to like, such as Dunkin' Donuts.
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Investors can count on fairly stable earnings and revenue with consumer-brand stocks. For example, between 2000 and 2007, Coca-Cola's annual revenues bounced around between $26 billion and $30 billion, according to S&P Capital IQ. Over the last four years, its top line has stayed within the $47 billion to $53 billion range.
While this may lead to criticism of the companies for limited growth, the stability means many of these companies can predict cash-flow levels from year to year, and that makes it easier for them to pay—and grow—dividends, Grundy said. Right now the consumer staples subsector has a 2.68 percent yield, which is higher than the S&P 500 2.08 percent payout.