Many people believe you need huge sums of money to invest, but that's just not true. In fact, with as little as $100 (or less) you can buy a stake in some pretty incredible companies. Right now that amount will get you in the door at Hormel Foods (HRL -0.74%) and McCormick (MKC 1.40%). These are great companies that you probably know very well already, but here's why you might want to own them.
Hormel has a long history of producing protein. It still does this, but it has been shifting its focus away from commodity products and more toward branded offerings for which it can charge higher prices. Its portfolio includes names like SPAM, Skippy, Columbus, and Planters. But that's just a small sample of what it offers as it has leading name brands throughout the grocery store.
In addition, Hormel also produces pre-cooked meats for the food service industry. This business has actually been doing very well in the face of the labor shortages following the pandemic as buying pre-cooked meat means less need for employees.
Although recent dividend increases have been modest, thanks to the pandemic and inflation, dividends have grown at a healthy 14% annualized rate over the past decade and are expected to be $1.04 for 2022. That's a pace that should help you keep up with, and likely speed past, the negative impacts of inflation. And it's worth noting that Hormel is a Dividend King, further underscoring the company's long-term commitment to shareholders.
Right now, the company's costs are rising faster than it can pass price increases through to customers. But that's more of a near-term timing issue that should not worry investors greatly. Notably, the company has a strong balance sheet with a modest debt-to-equity ratio of 0.47. Yes, margins are likely to be under pressure for a bit, but Hormel should have little trouble muddling through the current headwinds while continuing to reward investors over the long term.
McCormick is just on the edge of $100. Some days it's a bit over and some days it's a bit under. Either way, this is a food maker that is worth a very close look. It makes spices and flavorings, which would seem like a boring business.
Only it isn't. It sells spices in the grocery store, which is probably what you think of when you hear its name. However, it also sells spices to businesses. And it has been expanding its portfolio of flavorings in recent years through acquisitions like French's Mustard and Frank's Hot Sauce, among others. That has positioned it as an even bigger player in the niches on which it is focused.
McCormick has increased its dividend at an annual rate of 9% over the past decade. And unlike Hormel, McCormick's hikes really haven't slowed down, keeping a pretty consistent pace over the one-, three-, five-, and 10-year periods. It has over two decades' worth of increases behind it, showing that dividends are very important to the company.
To be fair, McCormick's stock is rarely cheap. Indeed, the dividend yield is toward the low end of its historical range right now. That suggests you will be paying full price here even at $100. However, over the long term, given the dividend growth rate and business success the company has achieved historically, this is a name that should serve you well if you treat it as a buy and long-term hold. (For reference, Hormel's yield is toward the high side of its range, suggesting it is relatively cheap today.)
Two options for growth
Hormel and McCormick may seem like boring food companies, but boring doesn't mean slow growth. And the rapid dividend growth they have achieved over time proves that out. If you are looking to add some new names to your portfolio with a growth flare to them, both are worth examining today.
Hormel is a better bet for those with a value bent, while McCormick is probably most appropriate for investors willing to pay full fare for great growth names. And, remember, a company can't keep raising its dividend at a rapid clip if it isn't doing something right along the way.