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What are we looking for?

Sustainable dividends from popular and well-established food brands.

The screen

Reports this week that Hormel Foods Corp. aims to spend US$3-billion to acquire Kraft Heinz Co.’s Planters snack brand just highlight the value of top global food brands. That’s even more so as the pandemic keeps consumers eating at home.

Still, intense competition means that food makers are racing to expand the product lines of each of their top brands. That should let industry leaders wring even more from an at-home eating trend expected to live on past the pandemic.

Our search started with U.S. dividend-paying packaged food companies with steady growth prospects ahead. We then applied our TSI Dividend Sustainability Rating System. It awards points based on eight key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated eight stocks. Mondelez International Inc., Campbell Soup Co., General Mills Inc. and Kellogg Co. are all big packaged food makers with leading brands. With a successful sale of Planters Nut & Chocolate Co., famous for its Mr. Peanut mascot, Kraft Heinz would further simplify its offerings to concentrate on more promising brands. For its part, Hormel Foods aims to expand beyond its core offerings, which include Spam and Skippy peanut butter. J.M. Smucker Co. is a leader in jams, coffee and peanut butter. Prepackaged offerings from B&G Foods Inc. include comfort staples such as Cream of Wheat. Its stock is up more than 100 per cent over the past year on a total return basis as high COVID-19 infection rates in the United States spur consumption of its portfolio of brands – especially sales of its Green Giant frozen foods.

We advise investors to do additional research on any investments we identify here.

Select U.S.-listed packaged-food stocks 

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Bil.)1Y Ttl. Rtn. (%) Recent Price (US$)
1General Mills Inc.GIS-NHighest103.635.27.356.82
2Kellogg Co.K-NAbove Average93.920.1-15.758.01
3Campbell Soup Co.CPB-NAbove Average93.114.3-3.747.12
4Mondelez Int'l Inc.MDLZ-QAbove Average92.380.3-3.955.28
5Kraft Heinz Co.KHC-QAbove Average84.840.513.333.01
6J.M. Smucker Co.SJM-NAbove Average83.113.19.8114.48
7Hormel Foods Corp.HRL-NAbove Average82.126.30.947.88
8B&G Foods Inc.BGS-NAbove Average75.82.1114.732.84

Source: Dividend Advisor.

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. 

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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