Five Food Stocks With Tasty Dividends
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Economic growth is decreasing in the United States with the unemployment rate increasing, but people still have to eat. Just as consumers turn to comfort foods in times of personal stress, investors should load up their portfolios with shares of these stocks during periods of economic crisis. The dividend income received from publicly traded food stocks such as Campbell Soup (NYSE: CPB), General Mills (NYSE: GIS), Hormel Foods (NYSE: HRL), Kraft Foods (NASDAQ: KRFT) and ConAgra (NYSE: CAG) makes the tough economic times much easier to swallow, too.
The turnaround strategy at Campbell Soup is flowing like chicken noodle into a bowl on a cold winter's day. For the last quarter of market action, the share price is higher by 12.53%. This is expected to rise even more in the year ahead as the company plans to introduce 50 new food items. These will include offerings in such avant garde' flavors as Moroccan chicken and Coconut curry packaged in trendy pouches, rather than cans, in an effort to appeal to younger consumers. This seems to be working as soup sales rose by 9% for Campbell in the most recent quarter after two years of declining.
Hormel Foods is up 3.29% for the month as the company's expansion of its high-margin grocery business and Mexican products segments has done very well. As a result, revenue is up by 50% to $8 billion with a 90% increase in earnings-per-share. Since 2005, the shares of Hormel Foods have returned 10.6% against just 3.7% for the Standard & Poor's 500 Index.
The dividend history at General Mills is like that of few other stocks. For over a century, General Mills has been paying out dividend income consistently. Financing this has been an earnings-per-share growth averaging 8.16% the past five years with a profit margin of 9.01%. By contrast, Kellog Company, its main competitor, has a profit margin of only 8.92% with earnings-per-share growth over the past five years registering in at just 6.16%.
Kraft Foods has a true global presence with India a major target for expansion. Kraft Foods is counting on the burgeoning consumer class around the world to greatly increase sales of its signature products such as Oreo cookies and Cadbury chocolates. Earnings-per-share growth this year is up 38.60% for Kraft Foods. Next year it is expected to rise another 10.84%.
ConAgra has risen 3.63% for the last month on a Buy recommendation with a target price of $30. Now trading around $25.60, ConAgra has a price-to-sales ratio of just 0.78. ConAgra just purchased the frozen food brands of PF Changs and Bertolli from Unilever. At present, ConAgra products are in 97% of American households. About 5% of CongAgra's sales come from international markets, primarily Cananda and Mexico.
Each of these food companies has a very tasty dividend framework. The average dividend yield for a member of the Standard & Poor's 500 Index is around 2%. All beat this mark, as the following chart reveals.
CAG Dividend Yield data by YCharts
In addition to the solid dividend income, the dividend payout ratio of these companies allows for dividend growth in the future along with stock repurchase programs to reward the shareholders of the companies. The chart below shows the ample cash flow of these stocks in the dividend framework.
CAG Payout Ratio TTM data by YCharts
There are also bullish profit margin trends for each of these stocks in the chart below. This will allow for a healthy total return for investors, augmented by the robust dividend yield.
HRL Profit Margin data by YCharts
Investing legend Peter Lynch advised to "buy what you know." It was the opinion of Lynch, who guided the Fidelity Magellan fund to annualized returns of 29.2% from 1977 to 1990, that individual investors have a significant advantage over Wall Street professionals in that they could actually see what was selling at the local mall; and not have to rely on a computer screen for direction.
The one item anyone knows best is what they eat. The products of Kraft Foods, General Mills, ConAgra, Hormel Foods and Campbell Soup are enjoyed by billions of consumers not just shopping at the local store, but at markets around the globe. With both earnings and dividends increasing from the greater sales, investors will enjoy superior total returns even during times of economic declines.
Fool blogger Jonathan Yates does not own any of the stocks mentioned in this article. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
