Hershey: A Sweet Idea

09/02/2019 5:00 am EST


Jimmy Mengel

Editor, Outsider Club

People love chocolate. Americans eat nearly 20% of the world’s chocolate — or around $18.27 billion. That helps make The Hershey Company (HSY) a dividend machine, asserts Jimmy Mengel, editor of The Crow's Nest.

The company has paid a higher dividend every year since 2009 and has maintained or grown its payout every year since 1930 — the year after the largest stock market crash in world history.

The year that began the Great Depression. The decade that was called the “Dirty Thirties” due to the Dust Bowl. While “Black Blizzards” made of dust were whirling around the southern plains, Hershey Chocolate was still selling.

It stood the test of time. In good times — and in horrible times — people still splurge for the creature comforts of chocolate. Well-branded consumer foods companies like Hershey are known for their stability.  They have existing relationships with retailers to make sure that when you buy a candy bar, Hershey is the first product you see.

Sure, Hershey could coast on its brand.But it isn’t resting on its rich, chocolate laurels. In the past five years, the company has invested over $3 billion into marketing and research and development. Its rivals could only dreamof catching up to that. It has made Hershey the biggest player in North American chocolate with a 45% market share.

In the last quarter, cost cuts amplified Hershey’s gross profitability wins, leading to a 9% increase in operating profit after adjusting for unusual items.

Oh, and its gross margins came in at 49.5% in the 2019 second quarter, compared to 45.3% during the same time last year. Net income topped $312.8 million, or $1.48 per diluted share, a 38% jump year-over-year. Not too shabby.

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