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The 5 Safest Dividend Stocks Part 3: Hormel
04/01/2020 5:00 am EST
In this 5-part series, we selected the five safest dividend stocks around — each a Dividend Aristocrat with 25+ years of consecutive dividend increases, notes income expert Ben Reynolds, editor of Sure Dividend.
Another attractive quality of our top five safest dividend stocks is that they managed to outperform the S&P 500 during both The Great Recession and the recent Coronavirus Crisis.
Next up in the series is Hormel Foods (HRL). Hormel is a global food manufacturer with nearly $10 billion in annual sales, and a market capitalization of $25 billion.
The company sells its products in 80 countries worldwide, and its brands include its namesake Hormel products, as well as Jennie-O, Skippy, SPAM, Applegate, Justin’s, and more than 30 others.
We believe Hormel has a highly defensive business model and should continue to generate steady profits, even in a recession. People will always need to eat, and in economic downturns may actually shift buying towards Hormel’s product line.
Hormel stock has increased 3% year-to-date, far outperforming the S&P 500’s 19% year-to-date decline. This indicates Hormel’s defensive qualities. In addition, Hormel is a member of the Dividend Kings, having increased its dividend for 54 consecutive years. The stock has a solid 2% dividend yield.
Hormel reported strong quarterly financial results on February 20th. Organic volume increased 2% while organic revenue rose 4% during the quarter. The Grocery Products segment saw its revenue decline by -11% to $541 million, but its Refrigerated Foods segment made up for this with 6% growth.
Jennie-O segment revenue rose 3%, as that brand continues to gain momentum. The International and Other segment increased 5.4%. In all, Hormel saw broad-based growth for the quarter, and we expect at least stable results going forward even during the coronavirus crisis.
Investors can look to Hormel’s performance during the Great Recession of 2008-2009 for evidence of its likely performance in a future recession.
rmel’s earnings-per-share actually grew during the Great Recession while most of the world was in rather dire straits, a testament to the stock’s defensive nature. It has significant competitive advantage which fuel its strong performance during recessions.
Hormel’s main competitive advantage is its leading product portfolio. According to the company, it has 35 products that are either #1 or #2 in their category.
Hormel has proven brand strength, with steady demand from year to year. Hormel is not a cheap stock on the basis of valuation, nor does it have a high dividend yield. But it offers investors consistency and reliable dividend growth every year, regardless of the economic climate.
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