Editor's note: This article has been corrected. The company saw a 15.1% improvement in price/mix in the third quarter. 

Investing objectives and strategies may differ from one investor to another. But the end goal is basically the same for everyone: No one wants to worry about money ever again.

Income investing is a common strategy that is used to reach the financial promised land. This is because many investors don't want to have to rely on fickle equity markets to sell off their portfolios and pay their living expenses. In theory, owning dividend stocks can provide a stable stream of income for the rest of your life to pay your bills.

One stock that fits well within an income investor's portfolio is the consumer staples company Conagra Brands (CAG -0.89%). But should investors buy the stock at the current share price? Let's dig into the company's fundamentals and valuation to find out.

Two people shop at a grocery store.

Image source: Getty Images.

Conagra has numerous products that consumers love

Conagra Brands itself isn't a household name to consumers. But if consumers were to look closely at packaging of food products in their pantry or freezer, there's a good chance they would find a brand or two owned by the consumer staples company. That's because the company's brands include Healthy Choice frozen meals, Hunt's tomato sauce, and Birds Eye frozen vegetables.

Q3 2023 Organic Net Sales Growth Rate Year-Ago Period Organic Net Sales Growth Rate
6.1% 6%

Data source: Conagra Q3 2022 earnings press release; Conagra Q3 2023 earnings press release

Conagra reported $3.1 billion in net sales during its fiscal third quarter ended Feb. 26, which was a 5.9% year-over-year growth rate. What was behind the company's healthy top-line growth rate for the quarter?

The company saw a 15.1% improvement in price/mix, the result of price hikes that were passed on to customers to keep up with rising costs. And because customers regularly consume the company's products (and want to continue), these price hikes were only met with some pushback.

That is how Conagra's product volume dropped just 9% during the quarter. Along with a modest 0.2% decrease in net sales stemming from the stronger U.S. dollar, this explains the company's mid-single-digit net sales growth for the quarter.

Q3 2023 Net Margin Year-Ago Period Net Margin
11.9% 9.6%

Data source: Conagra Q3 2023 earnings press release

Conagra's non-GAAP (generally accepted accounting principles) adjusted diluted earnings per share (EPS) rocketed 31% higher over the year-ago period to $0.76 in the third quarter. The company's cost of goods sold and selling, general, and administrative expense categories grew at a much slower rate than net sales. This caused Conagra's net profit margin to significantly expand, which explains adjusted diluted EPS growing leaps and bounds ahead of net sales during the quarter. 

The company's growth prospects are also solid: Analysts expect adjusted diluted EPS to compound by 8.4% annually over the next five years, which is about the same as the packaged foods industry average of 8.5%. 

The market-topping dividend has room for growth

Conagra's 3.4% dividend yield is far higher than the S&P 500 index's 1.7% yield. And with the quarterly dividend per share growing by 55.3% in the past five years, the company has also delivered respectable dividend growth. 

CAG Dividend Chart

CAG Dividend data by YCharts

Given that the dividend payout ratio is anticipated to come in at approximately 47% in fiscal year 2023, the payout should have no problem continuing to grow in the future. That's why I would be disappointed by any less than high-single-digit annual dividend growth for the foreseeable future from Conagra.

A solid business at a discounted valuation

Shares of Conagra have rallied roughly 10% in the last 12 months. Yet the stock still looks to be cheap.

Conagra's forward price-to-earnings (P/E) ratio of 13.4 is well under the packaged foods industry average forward P/E ratio of 17. Paired with steady business fundamentals, this is why I believe the stock is a buy for income investors seeking robust dividend growth to boot.