Consumer Goods Company Offers 3% Yields and 14 Years of Dividend Hikes
By: Ned Piplovic,
The Campbell Soup Company (NYSE:CPB) has rewarded investors with 14 years of dividend hikes and currently offers a 3% yield to its shareholders.
While the share price has struggled over the past year, the growing income driven by dividend hikes might be incentive enough for some investors to consider this stock. Additionally, a positive resolution of a current acquisition dispute, could benefit the company and send its share price higher.
The ex-dividend date is scheduled for October 12, 2017, and the pay date is on October 30, 2017.
Campbell Soup Company (NYSE:CPB)
Campbell Soup Company, manufactures and markets food and beverage products. The company operates through three segments: Americas Simple Meals and Beverages, Global Biscuits and Snacks and Campbell Fresh.
The Americas Simple Meals and Beverages segment manufactures and sells soups, broths, sauces, pasta beans and other ready-to-eat products under multiple brands, which include Campbell’s, Swanson, Prego and Pace. Additionally, this segment manufactures Swanson canned poultry, V8 juices and Campbell’s tomato juices. The Global Biscuits and Snacks segment provides Pepperidge Farm cookies and crackers, as well as fresh and frozen bakery products in the United States. Internationally, this segment manufactures Kelsen cookies worldwide, as well as Arnott’s biscuits in Australia and the Asia Pacific. The Campbell Fresh segment provides Bolthouse Farms fresh carrots, refrigerated beverages, refrigerated salad dressings and refrigerated soups, as well as Garden Fresh Gourmet salsa, hummus, dips, and tortilla chips. Founded in 1869, the Campbell Soup Company is headquartered in Camden, New Jersey.
The share price rose 17.4% between the end of September 2016 and early February 2017, when the price reached its 52-week high. However, the share price has been on a downtrend since the February peak and has lost more than 27% of its value. The share price closed on September 29, 2017, at $46.82, which is approximately 14% lower than it was one year ago.
The current share performance will certainly scare away risk-averse investors, who will seek higher asset appreciation elsewhere, as almost 60% of analysts covering this stock have a Hold recommendation and only 11% of analysts recommend a Buy.
However, the income investors might be interested in the company’s strong record of dividend hikes. The current quarterly dividend of $0.35 yields 3.0% and converts to a $1.40 total annualized payout. This 3.0% yield is 10.7% higher than the company’s average yield over the past five years.
Additionally, CPB has a solid record of raising its dividends over extended periods. The company started paying a dividend in 1902. Over the past 14 years, it has missed a dividend hike only once. Over those 14 years, the total annual dividend distribution grew at an average rate of almost 6% per year, which resulted in a total dividend boost of 122% since 2003.
While Campbell Soup Company’s current yield might seem low compared to some other securities, the company outperformed the average yields of its peers in the Consumer Goods sector and the Processed & Packaged Goods segment by 68% and 61%, respectively.
The company announced in July 2017 that it entered into an agreement to acquire Pacific Foods – a leading producer of organic broths and soups, as well as shelf-stable plant-based beverages and other meals. The acquisition is a strategic move to gain easy access to the fast-growing organic and natural food market, which is expanding rapidly on the demand by younger customers.
However, a lawsuit against Pacific Foods by a former shareholder has placed the acquisition agreement on hold, which is putting downward pressure on CPB’s share price. A favorable dispute resolution in the next 60 days – a deadline set by the Campbell Soup Company – could relieve some of that pressure and the share price might return some gains to accompany the dividend income.
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