Dividend Increase: Hormel (HRL) 2018

Hormel Foods (HRL) has announced its 2018 dividend increase of $0.0175 per share per quarter, bringing it’s quarterly dividend to $0.1875 from last years $0.17.  This increase is a 10.29% increase from 2017.  This is an impressive 52 straight years of dividend increases from the maker of everybody’s favorite canned meat (SPAM) and 89.5 years of dividend payments.  The current yield on HRL sits at 2.06% based on the 12/29/17 closing price of $36.39.

While a nice increase for the year, it does fall slightly below my expectation of a 2 cent increase.

Lets look at the dividend history:

Looking at the dividend history going back to 2005, we see the average increase has been 16.11% per year.  Considering this is from an established company in a boring food industry, this is super impressive.  Not impressed?  Let’s put it another way.  During this 14 year time frame, your dividend income would have increased 567.25%

Dividends are only a part of the tale?

HRL vs S&P500

It was a bumpy ride this year for HRL, but the late summer provided a sort of gift for bottom feeder investors as HRL went into the low 30’s.

Let’s take a look an see if there’s been any real growth in share price of HRL compared to the S&P500…

Apparently, there must be a lot of secret SPAM lovers out there as HRL has trounced the S&P500 over the last decade.  So capital appreciation and a sexy dividend history.

HRL Key Stats

Market Cap: $19.28 Billion

Dividend Yield: 2.06%

Payout Ratio: 40.43%

Profit Margin: 9.24%

Beta: 0.30

PE Ratio: 23.18

Total Cash: $444.12 Million

Total Debt: $250 Million

That’s a pretty good looking balance sheet with low debt and decent cash levels.  I like that the company has such a good history of healthy dividend increases, yet the payout ratio still sits at 40% of earnings.  While the margins aren’t anything spectacular, keep in mind this is a food company.  HRL reminds me of a couple other companies that fly under the radar, SHW and AZO.

Conclusion

This is a great company to be long for both old and young.  There is good capital appreciation for younger investors to be patient and gain from, but for a retiree looking for good dividend income that can outpace inflation, HRL has it all.

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Readers Comments (39)

  1. A nearly 600% dividend increase in 14 years is incredible to consider. Hormel has definitely tempted me. When the times are bad, folks will eat their food even more. When the times are good, it seems that Spam is still in.

    • I won’t lie. I actually am a fan of spam. Spam/pineapple fried rice = taste bud explosion.
      It’s a sleeper stock

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