This is part of The Motley Fool's annual "Stocks for Mom" special.

Coming Friday, May 9: It's a dirty job but someone has to do it. This firm makes money when the economy is in the tank. It fosters staffing transitions for companies suffering from layoffs -- it's philanthropic, really.

Lance, Inc. (Nasdaq: LNCE)
 Trading at $7.50 as of May 2, 2003

Dear Mom:

You've known for many years that my favorite stocks include eBay(Nasdaq: EBAY), Johnson & Johnson(NYSE: JNJ), Pepsi(NYSE: PEP), and some others that I own, and you've benefited from investing Foolishly in some of them, too.

Mom, you've also had a good portion of your future retirement money right where you arguably should: In an S&P 500 index fund. Index funds typically outperform mutual funds while offering lower fees and tamer tax bills. So, Mom, you're doing pretty well with your investments.

This year, I wanted to offer you something different and something with a high dividend yield, so I searched. You could buy Altria(NYSE: MO) or R.J. Reynolds(NYSE: RJR) for yields above 8%, but you've always frowned on smoking. Plus, buying industries that are under attack from several fronts is especially risky. But what about a food company with an 8% yield?

Looking at Lance
I found a little North Carolina company, Lance, Inc.(Nasdaq: LNCE), that you might want to consider for a small corner of your portfolio that you're not dependent upon. This is a high-yield, turn-around type of investment, so it isn't without some added risks.

Founded in 1913 and taken public in 1961, Lance produces and distributes a variety of packaged retail snack foods, including Cape Cod potato chips, "Gold N Chees" and "Toast-Chee" crackers. The focus is crackers, wafers, cookies, and chips. Annual sales the last three years have hovered around $550 million.

Stalling revenue is partly why the stock has been halved over the last year, to 20-year lows. Recently at $7.50 per share, the stock yielded 8.4%. Earnings per share (EPS) the last four years have been $0.82, $0.75, $0.81 and finally $0.68 most recently, in 2002. This year, EPS is only expected to be $0.15 to $0.25, which is why the stock has fallen so much, and how it came to yield over 8%.

What I mainly like about Lance is its non-glamorous, relatively simple business of distributing snacks to convenience stores, supermarkets, gas stations, and vending machines. Food is a steady business, as evidenced by Lance's extremely long history, most of which includes gradually increasing sales and earnings.

From 2000 through 2002, Lance earned about $30 million a year in free cash flow on about $550 million sales. It paid out $18 million a year in dividends. Today, Lance has a $250 million enterprise value, so if it can get back on track and replicate its recent free cash flow, the $7.50 stock would trade at about 8.3 times the $30 million in free cash flow.

But patience will be needed. After $3.7 million in first-quarter 2003 free cash flow, and with more "spend to improve" plans in place, free cash flow will likely be slight this year.

Problems include discontinuation of some mini sandwich crackers and cookies, severance provisions (those two items recently cost $9.5 million, or $0.20 per share in one-time costs), and needed investments in distribution. Additionally, sales dipped 3%, commodity prices rose, and the company lost $3.1 million in the first quarter.

Lance is working to cut costs, improve distribution and vending issues, and increase profitability (its average delivery "drop" is worth $60). It's also introducing new products (planning for some the second half of this year) and cutting laggard snacks. All this costs money, takes time, and involves risks -- including the chance of more one-time charges this year. But Lance should be positioned to rebound around 2004, and a stock usually moves ahead of a financial recovery.

Meanwhile, there's the 8.4% yield that the Board of Directors reviews quarterly. This quarter, the Board voted to keep the dividend where it is. Given the drop in free cash flow, the dividend could come down, as it did in 1999 (from $0.24 per share quarterly, to the current $0.16). Odds are, though, that the yield would remain significant even if it were decreased, and ultimately, the stock will eventually rebound given the company's stable long-term business.

You wanted something new, Mom. Lance is something very different for us to consider. Just remember, new to you and me isn't always better than what we already know. This is one to consider, though.

Jeff Fischer doesn't own shares of Lance at this time. The Fool is investors writing for investors, and has a full disclosure policy . You can find monthly stock ideas from Jeff and other Motley Fool analysts in The Motley Fool Select .

A Stock for Mom represents the opinion of one Fool and should in no way be taken as the opinion of either The Motley Fool, Inc. or the company in question, or as representative of anyone or anything other than that specific Fool's thoughts.