Early 2022 has not been kind to investors. Through Jan. 28, the S&P 500 was down 7% while the Nasdaq was down 12%. While both have recovered a bit, it could be a rocky ride this year. During times like this, it's important to have a diversified portfolio with some stable stocks that can help mitigate the market's volatility.
One company investors should consider is McCormick (MKC 0.23%). Year to date, McCormick is up a little over 3%. While that's nothing to write home about, it is handily beating the market so far in 2022. With a resilient business model and a growing dividend, McCormick is worth a closer look.
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Record sales growth in 2021
As the leader in flavor, McCormick should be no stranger to most consumers. In addition to its own label of flavor products, McCormick owns some of the best-known flavor brands, including Frank's Red Hot, Old Bay, and French's.
The company recently reported its fiscal fourth-quarter and 2021 earnings, and its strong position in this consumer space was clear. For the full year, revenue grew 13% -- a record result for McCormick. By comparison, 2020 saw revenue growth of 5%, and the company's guidance for 2022 puts revenue growth in the 3% to 5% range.
The company reports earnings in two segments. The consumer segment includes at-home products while the flavor solutions segment provides products to food manufacturers and food-service businesses. For 2021, the consumer segment grew revenue 9.5%, which was in line with the prior year's 10% growth. However, the flavor solutions segment reported a significant improvement with year-over-year growth of 19%, which follows a decrease of 4% in 2020.
These results speak to the resilience of McCormick's business model. During the height of the pandemic, when most restaurants were shuttered, the company's flavor solutions segment took a big hit. Fortunately, the consumer segment was able to pick up the slack as more consumers started cooking at home. Over time, as restaurants have reopened, the flavor solutions segment has rebounded, and consumer spending has remained steady. Clearly, McCormick's brands are keeping customers around.
Acquisitions that are paying off
Over the years, McCormick has been an acquisitive company as evidenced by the vast array of brands it owns. Two recent acquisitions have been particularly accretive to the company's results. In November 2020, McCormick acquired Cholula, a well-known hot sauce. McCormick followed that up a few weeks later with the purchase of flavor company FONA. Of the 13% sales growth McCormick reported in fiscal 2021, 4% came from Cholula and FONA.
Management also stated that both brands are accretive to gross and operating margins. McCormick is consistently profitable and cash-flow positive, resulting in a balance sheet that can accommodate future acquisitions.
A Dividend Aristocrat
Another reason McCormick can provide some ballast against the market's recent volatility is its dividend. McCormick is a Dividend Aristocrat -- a company that has increased its dividend for at least 25 consecutive years. In fact, with the recently announced 9% increase to its quarterly dividend, McCormick has now upped its dividend for 36 years. At present, McCormick's dividend yield is 1.5%, ahead of the S&P 500's 1.3%.
McCormick isn't a high-growth stock and it's unlikely to blow anyone away with its results. But having a few companies like McCormick in your diversified portfolio can provide stability when the growth stocks take a hit. Owning shares of McCormick may help some investors sleep better at night while also adding some dividend income.
