Five Dividend-paying Food Investments to Purchase for Propelling Portfolios

Five dividend-paying food investments to purchase for propelling portfolios feature a food and beverage fund, a potato provider, a chocolate maker, the owner of Frito-Lay and Quaker Oats, a cheese and ketchup conglomerate, and a provider of premium sauces.

The ongoing war in Ukraine is not stopping any of the food stocks from floating above the market mayhem. People still need to eat, so cutbacks typically come from other products and services.

Grain exports from Ukraine are down significantly, with Russia inflicting a barrage of missile attacks in multiple regions of Ukraine during the last 24 hours that included one hitting the much smaller nation’s biggest oil refinery. The number of reservists Russia is sending to front lines to prepare for an expected offensive this spring has been surging, along with land attacks across eastern and southern Ukraine, endangering and sometimes killing farmers in the region who remain.

BofA Global Research follows the industry closely and four of the five investments to purchase for propelling portfolios are on its list of recommendations. Here are the highlights of each of the five dividend-paying food investments to purchase.

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Five Dividend-paying Food Investments to Purchase: PBJ Leads Off 

Investors seeking exposure in the food industry can tap Invesco Dynamic Food & Beverage (PBJ), said Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter that recommends a variety of strategically selected portfolios. The fund aims to track the Dynamic Food & Beverage Intellidex Index. The index typically has 30 stocks of companies that are mainly engaged in the manufacture, distribution, or sale of products in the food and beverage, agricultural and new food technologies.

The index has frequent changes and selects securities using price momentum, earnings momentum, quality, management action and value. Turnover in the fund is about 98%.

Bob Carlson, pension chairman and Retirement Watch, talks to Paul Dykewicz.

Top holdings in the fund recently were Hershey (NYSE: HSY), Kraft Heinz (NASDAQ: KHC), PepsiCo ((NASDAQ: PEP), General Mills (NYSE: GIS) and Keurig Dr. Pepper (NASDAQ: KDP). About 45% of the fund is in its 10 largest positions.

The fund’s dividend yield is around 1.8%, while its share price has jumped 5.28% in the last 12 months. PBJ is up 0.45% for the past three months and 1.27% in the week.

Chart courtesy of www.stockcharts.com

Five Dividend-paying Food Investments to Purchase: Lamb Weston

Lamb Weston Holdings, Inc. (NYSE: LW), of Eagle, Idaho, supplies frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers worldwide. For more than 60 years, Lamb Weston has introduced uniquely presented products to more than 100 countries.

The company has manufacturing operations in the Pacific Northwest, primarily in the Columbia River Basin, arguably the world’s best potato-growing region. Lamb Weston employs more than 7,000 people worldwide in sales offices, manufacturing plants and corporate offices.

BofA gave Lamb Weston Holdings a price target of $115, a premium to the packaged food index. The investment firm wrote that the higher valuation compared to peer companies is warranted, since Lamb Weston is poised to approach pre-COVID levels with favorable demand trends and margin potential in fiscal year 2023 and 2024.

Chart courtesy of www.stockcharts.com

Can Lamb Weston Roar Like a Lion?

Reasons why Lamb Weston could top its $115 price target include demand rebounding faster than expected and category growth staying above 3% with tight industry supply expected to continue in the medium- to long-term. Tight supply permits providers to hike prices to both global and food service customers, BofA wrote.

Risks to reaching the $115 price target include higher-than-expected potato costs, unforeseen problems propelling price increases to cover inflation and restore margins, any influx of new industry capacity and a slowdown in on-premise sales activity if consumers face reduced spending power.

Paul Dykewicz interviews Bryan Perry, who heads Breakout Options Alert.

Bryan Perry, the leader of the Cash Machine investment newsletter and the Breakout Options Alert trading service, recommended Lamb Weston call options in the latter service. The stock is up 12.76% so far this year, as of the close on Feb. 17.

Five Dividend-paying Food Investments to Purchase Include Hershey

BofA also recommended The Hershey Co. (NYSE: HSY), setting a $270 price target. With some slack in capacity, Hershey is better positioned now than in recent years to meet demand increases if needed, BofA wrote in a research note.

For fiscal year 2023 guidance, HSY provided perspective on sales, pricing and inflation, causing BofA to write that it did not expect much surprise one way or another about the company’s earnings. Hershey is executing on its pricing actions and has seen lower-than-expected elasticities across its portfolio as consumers continue to spend on sweet treats and snacks in an inflationary environment, BofA wrote.

“In addition, HSY has been able to maintain share in its categories with the lowest private label exposure in its peer set,” BofA continued.

Potential outperformance could come from continued market share gains in a low private label exposure environment, faster moderation of inflation, low elasticity of demand persisting and volume gains offsetting any pricing decelerations, BofA opined. Possible risks to reaching the price target include elevated inflation taking longer than expected to taper off, competitors grabbing market share from HSY and negative surprises on packaging, logistics or special ingredient costs that aren’t traditionally hedged by Hershey.

Chart courtesy of www.stockcharts.com

Jim Woods, who leads the Bullseye Stock Trader advisory service and the Intelligence Report investment newsletter, is not currently recommending Hershey but has done so in the past. Woods features an Income Multipliers portfolio in his newsletter that seeks to identify stocks on the ascent that pay dividends just like Hershey.

Paul Dykewicz meets with Jim Woods, head of Bullseye Stock Trader.

Woods, who openly acknowledges his fondness for quality food and drinks, likes to use his personal preferences in choosing the stocks he recommends. As Hershey is a stock Woods has recommended in the past, he may do so again.

PepsiCo Fits With Five Dividend-paying Food Investments to Purchase

PepsiCo is a major beverage company that also owns the Frito-Lay brand of snack foods and Quaker Oats. BoA put a $205 price target on PepsiCo, along with a buy recommendation.

“We expect PEP is set up for another quarter of strong organic sales growth, modeling 4Q22 organic sales growth of +8%,” BofA wrote.

PepsiCo is valued at a premium to its non-alcoholic-beverage peers that is “justified” based on the view that the stock is positioned to deliver against its long-term algorithm and return cash to shareholders via dividends and share repurchases, the investment firm wrote.

Pluses for PepsiCo include low-to-moderate foreign exchange headwinds, growth opportunities and improving volume/price/mix in soft drinks. Risks to reaching the price target come from foreign exchange becoming a drag on results and Frito-Lay North America incurring a decline in volumes due to price hikes.

Chart courtesy of www.stockcharts.com

Connell Cites Growing Food Revenue in Ascent of Pepsi

Michelle Connell leads Dallas-based Portia Capital Management.

Pepsi is a world-class competitor in the snack and convenience food category, Connell said. The U.S. snack market is valued at $115 billion and Pepsi currently has 20% share, she added.

With 55% of sales coming from snack and convenience foods, Pepsi’s leaders know that food is one of the keys to the company’s success, Connell said.

To make sure that it holds its ranking in this segment, Pepsi is investing in the innovation of its snacks, Connell said. In 2020, Pepsi created a growth office for its snack products.

Pepsi is researching different ingredients, packaging formats and flavors to enhance its presence in the category, said Parth Raval, chief growth officer for PepsiCo Foods North America, comprising Frito-Lay North America, Quaker Foods North America and PepsiCo Foods Canada. The company has found that consumers increasingly are turning to snacks instead of full meals.

“Families are frequently so busy that a traditional sit-down meal is not an option,” Connell said. “Pepsi is trying to appeal to this behavioral change.”

For example, consumers now eat Quaker granola bars outside of breakfast. Also, a line of “Tostitos Toppers” was created to take advantage of this behavior, Connell counseled.

Pepsi further created two direct-to-consumer websites for its snacks. One of these is Snacks.com. These online options allow a consumer to find flavors or brands that may not be easily found on store shelves.

An example of an unusual new flavor is Southern Biscuit & Gravy Lays Potato Chips, Connell said. They are sold at most Southern gas stations, she added.

Pepsi Pumps up Dividend Payout 10%

Pepsi announced a 10% boost in its dividend payout when it released its fourth-quarter financial results on Feb. 9. The quarterly dividend rose to $1.265, marking the 51st year in a row that Pepsi has raised its payout.

Pepsi continued its streak of consistently beating Wall Street expectations with its latest financial results. Organic revenue grew 14% in North America and 16% in international markets, Connell said.

Price hikes to consumers drove Pepsi’s revenue growth, not an increase in sales volume, Connell continued. The company’s chief executive officer said there is no near-term intention of further price increases, but recent price hikes will not be cut in the future.

Five Dividend-paying Food Investments to Purchase: Kraft Heinz

BofA gave Chicago-based Kraft Heinz Company (NASDAQ: KHC) a buy rating and a $48 price objective. The valuation is below the packaged food group average but the investment firm wrote at-home food consumption remains elevated as consumers show sensitivity to the higher cost of eating out.

KHC could outperform expectations with continued improvement in market share trends and services levels, topline strength driving organic sales growth and pricing strength protecting margins. Another plus could come from quicker-than-expected tapering in inflation.

Risks that could hurt the stock price performance include high inflation persisting longer than expected and pressuring margins and consumers trading down to buy private label products, BofA wrote. If demand elasticities worsen while pricing simultaneously tapers off, organic sales growth could be “sandbagged,” BofA wrote.

Chart courtesy of www.stockcharts.com

Russia’s Invasion of Ukraine Intensifies

The five dividend-paying food investments to purchase have been spared from fallout of the ferocious fighting taking place in Bakhmut, Ukraine, where Russian forces are seeking to seize control of a key highway and a key transportation route. Russian airborne units have joined Wagner mercenary fighters in the battle for the city.

Russia’s troops have been “leveling Bakhmut to the ground, killing everyone they can reach,” Pavlo Kyrylenko, a Ukrainian prosecutor and politician who also is the current Governor of Donetsk Oblast, wrote on Telegram. Russia claimed to have captured a village just to north of Bakhmut as attempts to surround the city and seize control.

The U.S. State Department accused Russia of violating a key nuclear arms agreement by refusing to allow inspections of its nuclear facilities. The only agreement left to regulate the nuclear arsenals of the United States and Russia is the New START treaty, but inspections have been on hold since 2020 due to the COVID-19 pandemic.

Diabetes Increases Risk of Severe COVID, Report Indicates

Diabetics who have high blood sugar levels face a significantly greater risk of being hospitalized with severe illness from COVID-19, according to the International Diabetes Federation (IDF). Headquartered in Brussels, Belgium. the Federation reported “poor glycemic control was a risk factor for adverse COVID-19 endpoints.”

Worldwide COVID-19 deaths rose to 6,862,140 people, with total cases of 673,850,285, Johns Hopkins reported on Feb. 17. COVID-19 cases in the United States totaled 103,121,205, while deaths reached 1,117,482 as of Feb. 17, according to Johns Hopkins University. Until recent reports that China had more than 248 million cases of COVID-19, America had ranked as the nation with the most coronavirus cases and deaths.

The U.S. Centers for Disease Control and Prevention reported that 269,332,266 people, or 81.1% of the U.S. population, have received at least one dose of a COVID-19 vaccine, as of Feb. 15. People who have completed the primary COVID-19 doses totaled 229,914,797 of the U.S. population, or 69.2%, according to the CDC. The United States has given a bivalent COVID-19 booster to 49,932,850 people who are age 18 and up, equaling 19.3% as of Feb. 15, compared to 19.2% on Feb. 8, 19% on Feb. 1 and 18.8% as of Jan. 26.

The five dividend-paying food investments to purchase are climbing when industries such as technology have been struggling to recoup 2022 share price plunges. Despite technology tending to outperform in the long term, dividend-paying food investments have been satisfying investor tastes.