Kellogg Company (K) has been making America’s favorite cereals for 114 years. Brands like Frosted Flakes, Special K, and Kellogg’s Raisin Bran remain some of the most popular cereals in the world, suggests Genia Turanova, dividend and growth expert and editor of Unlimited Income — and a participant in the upcoming MoneyShow virtual event, August 3-5. Register for free here.
But the company has expanded into other products over the years. Today, Kellogg’s top snack brands include Pringles, Cheez-It, Pop Tarts, Eggo, and Rice Krispies Treats.
Kellogg’s revenue stream was under pressure just a few years ago because of the declining demand for cereal. But under the new CEO Steven Cahillane, formerly an executive at Coca-Cola (KO), Kellogg’s been refocusing on its snack business, while also cutting costs and selling non-core businesses.
In the midst of the pandemic, K’s operations have been running smoothly. And it’s set to benefit from two important factors: One is that the food business is designated essential by the government; the other is the growing demand for food consumed at home.
After factoring all the necessary operating expenses, Kellogg’s business easily (and steadily) generates over $1 billion in cash flow.
The company’s biggest brands — which include snacks — are still growing. In 2019, sales from its Cheez-It brand grew over 14%. Rice Krispies Treats had an even better year, as sales jumped more than 16%. Sales of Pop-Tarts jumped almost 10%.
Sales growth from its other two big names — Pringles and Eggo — was under 3%. But both of these brands were coming off 7% growth the previous year.
Kellogg’s core business is humming along. And in the coronavirus-impacted world, we can expect the sales of branded snacks to improve in the quarters ahead.
Smaller brands are turning into growth drivers. For example, its Morningstar Farms brand of veggie burgers should benefit from the growing popularity of “meatless” burgers.
Its Kashi brand should continue to grow as consumers look for more natural and organic options. Management also invested heavily in the RXBAR line of protein bars, a category that still has huge long-term growth potential.
Kellogg’s has paid a dividend to its investors every quarter stretching back to 1925. That’s 95 years of payouts! Management has also increased the dividend every year since 2005 and Kellogg is in an excellent position to keep raising its dividend for many years into the future.
