Hormel Foods Offers Five Decades of Annual Dividend Hikes (HRL)
By: Ned Piplovic,
The Hormel Foods Corporation (NYSE:HRL) has been distributing dividends to its shareholder for nine decades and has hiked its annual dividend payout for the past 51 consecutive years.
Even though the company’s current 2.24% yield pales in comparison to some high-yield sectors, it is more than 20% above the average of the entire Consumer Goods sector and the highest in the Meat Products Industry segment. Additionally, the company’s current streak of annual dividend hikes places it in a group of companies called Dividend Aristocrats.
This is a group of 51 S&P 500 companies that have a market capitalization of at least $3 billion and have raised their annual dividend payout for at least 25 consecutive years. Moreover, Hormel’s current record of consecutive annual dividend boosts placed it at the end of 2017 in the ultra-exclusive Dividend Kings group, which comprised just 19 companies with 50 or more years of consecutive annual dividend hikes.
The dividend history and the current fundamentals of this company indicate that investors interested in adding this stock with a long-term rising dividend to their portfolio do not have to rush their decision. However, investors who take a long position prior to the company’s next ex-dividend date of April 13, 2018, can start collecting dividend income on May 15, 2018, which is the company’s next pay date.
Hormel Foods Corporation (NYSE:HRL)
Based in Austin, Minnesota, and founded in 1891, the Hormel Foods Corporation produces and markets various meat and food products through five business segments – Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, Specialty Foods and International & Other. The company offers various perishable meat products, including fresh meats, frozen items, refrigerated meal solutions, sausages, hams and bacon. Additionally, Hormel produces shelf-stable products, such as canned luncheon meats, peanut butter, chilies, shelf-stable microwaveable meals, stews, meat spreads, flour and corn tortillas, salsas, tortilla chips and other products. Also, the company also offers turkey products, nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products. Hormel markets and distributes its products in more than 70 countries and more than two-thirds of its current 41 brands have either the largest or second largest share of their respective market category.
The company’s share price lost almost a quarter of its value in the 12 months prior to the end of March 2017. After entering the trailing 12-month period, the share price continued its decline and lost another 9.1% between March 27, 2017, and its 52-week low of $31.05 on October 30, 2017. After bottoming out at the end Of October 2017, the share price ascended more than 21% towards its 52-week high of $37.68 on December 4, 2017. Since its peak at the beginning of December, the share price declined more than 10% and closed on March 26, 2018, at $33.41. This closing price was approximately 2% below the share price from one year earlier but 7.6% higher than the 52-week low from late October 2017. Additionally, the share price is currently trending up and is 5.4% higher that it was six months earlier.
The current $0.1875 quarterly dividend is 10.3% higher than the $0.17 quarterly distribution from the previous period. The annualized $0.75 distribution for 2018 yields 2.24%. This current yield exceeds the company’s own 1.6% five-year average yield by more than 40% and the 1.87% average yield of the entire Consumer Goods sector by more than 20%. With the highest yield in the Meat Products market segment, Hormel’s 2.24% current yield is more than 220% above the average of all the companies in the segment and more than twice the average of only dividend-paying companies within the segment.
After more than five decades of consecutive annual dividend boosts, the company still continues to hike its dividend. Just over the past 20 years, the company managed to grow its annual distribution amount by an average of nearly 12% per year, with the three-year growth rate approaching 18%. The result of these robust growth rates is a total enhancement of the annual dividend amount of nearly 840% over the past 20 years, a four-fold increase over the past decade and double the annual payout over the past five years. The company’s current Dividend Payout Ratio of 41% is lower than its 45% five-year average and well within the sustainable range, which indicates that Hormel should easily manage to continue raising its annual dividends for the near future.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.