Hormel Foods: Back to Basics

09/26/2014 7:00 am EST

Focus: STOCKS

David Fish

Executive Editor, Moneypaper

When it comes to advising beginning investors, we often fall back on the notion of starting with basic necessities, such as food, fuel, and utilities—needs that have to be met by consumers, no matter the economic environment—observes dividend reinvestment expert David Fish, editor of MoneyPaper.

That principle doesn't stop with beginners, though. It also amounts to good conservative advice for veteran investors who may be concerned about the threat of recession, global turmoil, or an overdue bear market.

And it is especially appropriate for companies that carry top ratings for safety, financial strength, and predictability, such as our featured stock. Such companies tend to hold up better in market sell-offs and provide steadily rising dividends that enhance compounding through dividend reinvesting.

Founded in 1891, Hormel Foods (HRL) is an international producer and marketer of consumer-branded meat and food products; its products include sausages, hams, wieners, bacon, stews, microwavable entrees, hash, meat spreads, tortillas, salsas, salad dressings, and condiments.

Its brand names include Hormel, Always Tender, Compleats, Cure 81, SPAM, Dinty Moore, Jennie-O, Mary Kitchen, Chi-Chi's, and Little Sizzlers.

For the fiscal year that ends in October, consensus estimates call for HRL to earn about $2.23 per share, up from $1.97 a year earlier, and to go on to net about $2.58 per share in fiscal 2015.

The Hormel Foundation owns 48.8% of the 264 million outstanding shares and insiders own another 3.2%. The dividend, which has been increased for 48 consecutive years, provides a yield of about 1.8%.

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