Top Food Producers for Growth and Income Investors

Investors with a long-term view in search of growth and income should consider food- production companies like General Mills, Hormel, and Kraft.

Mar 24, 2014 at 12:40PM

Investors in the food-production sector can find several solid growth and income opportunities. Companies in this sector provide consumers with an array of commonly sought-after products. This includes food-production leaders like General Mills (NYSE:GIS), Hormel Foods (NYSE:HRL), and Kraft Foods (NASDAQ:KRFT).

General Mills -- a leader in cereals and other foodstuff
General Mills is well positioned as a leading cereal maker, especially with regard to its Cheerios line. The company also offers a variety of other moneymakers like soup and yogurt with its Progresso and Yoplait brands. General Mills also plans on introducing new products that management believes will support long-term earnings growth.

The best thing about General Mills is its long history of paying dividends. Earlier this month, the company's board of directors declared a quarterly dividend of $0.41 per share, payable May 1, to shareholders of record as of April 10 -- an 8% increase from the previous quarterly rate of $0.38 per share. Moreover, General Mills anticipates dividends per share in fiscal 2014 to come in at $1.55, an increase of 17% from $1.32 in the prior fiscal year.

Chairman and CEO Ken Powell said, "We expect dividends to grow with earnings over time, and we see this dividend growth as a key component of our long-term shareholder return model."

General Mills also reported results for the third quarter of fiscal 2014 this week that showed sales, operating profit, and earnings per share lower than year-ago levels. Company management attributed this to "generally weak food industry trends during this period" as well as "negative foreign currency effects." The weak food trend was said to be due in part to this year's harsh winter weather.

The dip in sales performance is really cyclical and does not appear to be a long-term threat, however. Anyway, it should not dampen investor enthusiasm for continued robust dividend payouts.

Hormel's cornucopia of products
Hormel Foods is strong in many ways and has a history of consistent revenue and earnings growth. And like General Mills, Hormel also has a long track record of dividend increases. In fact, the company paid its 342nd consecutive quarterly dividend effective on Feb. 14, at the annual rate of $0.80.

All things being equal, this trend should continue. That's because of Hormel's diverse line of grocery products, refrigerated foods and sandwich meats, and its history of successfully adding new products to its grocery cart.

The company recently reported its performance for the first quarter. Results were highlighted by record diluted earnings per share of $0.57, up 19% from $0.48 per share; also fueling results were operating profit increasing by 20% and record dollar sales of $2 billion, up 20% compared to the year-ago period. In particular, the company's earnings remained smooth partly because of its acquisition of Skippy products.

"Our recently acquired [Skippy] peanut butter business was a strong contributor to our Grocery Products segment results this quarter," said Jeffrey M. Ettinger, chairman of the board, president, and chief executive officer.

Kraft Foods' big shopping basket
Kraft Foods is one of the largest consumer packaged-goods companies in the U.S., with annual revenue topping $18 billion.

The company's food basket includes well known brands like Kraft, Maxwell House, Oscar Mayer, Velveeta, Jell-O, and Lunchables, among others. These products may not seem very sexy at first glance, but since Kraft split from its parent in 2012 (now going by the name Mondelez International), Kraft is leaner and meaner, so to speak, which will improve margins and allow it to continue increasing its dividend.

In fact, the company's board recently declared a regular quarterly dividend of $0.525 per share of common stock. The distribution is payable on April 25 to shareholders of record as of April 11.

Foolish food for thought
The food-production sector provides consumers with an array of widely known and popular consumer packaged goods, sandwich meats, and refrigerated products. One caveat is the challenge facing each company because of growing consumer concerns about the use and labeling of genetically modified organisms in food production.

As I have previously written, General Mills was the first to confront this challenge. Last year the company announced it will eliminate GMOs from its original Cheerios cereal and work to label GMO sources. And Kraft is also moving in a healthier direction with a recent announcement that artificial preservatives will be eliminated from its individually wrapped cheese slices. Ultimately, the question remains as to whether the food-production sector is nimble enough to meet the GMO challenge and whether modified plants are actually harmful.

That being said, this sector will continue to provide consumers with products they have come to know and continue to buy. And General Mills, Hormel, and Kraft each have proven histories of revenue and earnings growth with generous helpings of dividend yields. This makes these companies good buys for investors with a long-term view.

The dead simple "tax-skipping" strategy
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Kyle Colona has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers