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What are we looking for?

Sustainable dividends from the top trend in food sales – snacks.

The screen

Kellogg Co. announced this week plans to unlock shareholder value by breaking itself into three parts: global snacking, North American cereals and plant-based foods.

Underlying the decision is the food giant’s push to better focus on increasingly lucrative – and expanding – snack food demand. That segment, in fact, brought in about 80 per cent of the company’s 2021 revenue. The breakup allows the snacks business to solely focus on still-strong pandemic demand and the broader consumer shift to on-the-go eating.

Our search started with a list of North American firms with strong snack brands. All successfully compete in this expanding niche, which continues to bolster their prospects. We then applied our TSI Dividend Sustainability Rating System to a short list of income payers. It awards points to a stock based on 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 to cover dividends;
  • 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, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

North American companies with strong snack-food brands

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Mil.)1Y Ttl. Rtn. (%) Recent Price (US$)
1General Mills Inc.GIS-NHighest103.040,860.012.867.90
2Kellogg Co.K-NAbove Average93.423,266.16.367.92
3Campbell Soup Co.CPB-NAbove Average93.214,127.23.046.97
4PepsiCo Inc.PEP-QAbove Average92.8222,211.010.4162.03
5Mondelez Int'l Inc.MDLZ-QAbove Average92.382,786.4-4.160.28
6Hormel Foods Corp.HRL-NAbove Average82.324,742.0-4.245.72
7J&J Snack Foods Corp.JJSF-QAbove Average71.92,547.3-22.6135.11
8Utz Brands Inc.UTZ-NAverage61.61,902.2-41.913.51
9John B. Sanfilippo & SonJBSS-QAverage61.0813.9-21.669.99

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.

Our TSI Dividend Sustainability Rating System generated nine companies, all U.S.-based. John B. Sanfilippo & Son Inc. makes and sells nut and dried-fruit-based products under a variety of private brands and under the company’s Fisher, Orchard Valley Harvest, Squirrel Nuts and Southern Style Nuts labels. J&J Snack Foods Corp.’s snacking brands include SuperPretzel, Whole Fruit frozen novelties and more. Utz Brands Inc. is a maker of salty snacks; its brands include Utz Original potato chips, Snyder of Berlin, Zapp’s, Boulder Canyon and TGI Fridays snacks. PepsiCo Inc.’s well-known snacks include Frito-Lay brands Doritos and Cheetos. Mondelez International Inc. has Sour Patch Kids, Maynards and Ritz among its own selection of treats. What’s more, it’s now buying energy bar maker Clif Bar & Co. for US$2.9-billion.

Hormel Foods Corp.’s whopping US$3.4-billion acquisition of the Planters brand last year added to its Hormel Natural Choice deli meat snacks and other existing offerings. General Mills Inc. has popular snack brands Fruit Gushers, Bugles, Nature Valley granola bars and Chex Mix. Campbell Soup Co. makes Goldfish crackers, Kettle Brand chips, Milano cookies, Pretzel Crisps, Emerald nuts and more. And finally, Kellogg counts Pringles, Cheez-It and Nutri-Grain bars among its top brands in this key segment.

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

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

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