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Hormel: A Dividend King
04/13/2017 2:50 am EST
Hormel (HRL), an international manufacturer and distributor of branded food products, is a Dividend King with 51 years of consecutive dividend increases, asserts income expert Ben Reynolds, editor of Sure Dividend.
Hormel’s competitive advantage comes from its strong brand portfolio in a slow-changing industry.
The company has increased its earnings-per-share in 28 of the last 31 years (achieved by only 4 companies in the S&P 500), and increased dividends for 51 consecutive years in a row.
Hormel also benefits from its larger size, and regularly acquires smaller brands and scales their businesses.
Hormel is a recession-resistant business. The company’s products remain in demand regardless of the state of the overall economy.
Hormel has a mix of higher priced brands (Muscle Milk, Wholly Guacamole) and bargain-priced brands (Spam, Dinty Moore).
The company saw earnings-per-share grow 21% in 2009 during the worst of the Great Recession. Earnings-per-share should continue compounding at 10%+ over full economic cycles. Combined with the 2% dividend yield we see expected total returns of 12% or more.
Hormel has one of the lowest stock price volatiles of any stock, giving it a unique mix of double-digit growth and safety.
Hormel lowered earnings-per-share growth guidance for fiscal 2017 due to low turkey prices; temporary weakness in this segment does not materially affect Hormel’s long-term investment prospects.
Hormel is an extremely high-quality business. The stock is trading near its fair value, but should still produce outsized returns moving forward.
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