Hormel Foods (HRL -0.61%) is one of my largest holdings. It didn't achieve this through capital appreciation alone -- it holds a sizable position in my portfolio largely because I've added to my investment in it multiple times. While this investment is in the green, I'm trying to take advantage of what I believe is an attractive price point while I still can.

Getting bigger

When I buy a stock, I start with a set dollar-based investment that I consider a full position. After that point, based on what's going on with the stock, the company, and the broader market, I'll add incrementally to the stock, get out by selling it, or, when I make a good investment choice and the stock rises materially, just sit back and enjoy the show. That last one has happened with a number of my investments, some of which are worth four times what I put into them. But not Hormel.

A hand drawing a chart comparing cost and value.

Image source: Getty Images.

Hormel has languished to some degree. But over the time that I've owned it, it has increased its dividend each and every year. While the yield today is actually higher than when I started to buy the stock, I'm still positive on my overall investment.

Yield and price go in opposite directions, and stocks generally trade in dividend yield ranges. So as Hormel increased its dividend, its stock trended generally higher. The recent pullback hasn't been enough to offset the broader uptrend since I initiated my position.

However, as I've seen that yield rise back up to (and actually above) where I bought in, I've added to my investment. That increases my dividend income, which I reinvest at this point, and leverages me to a business rebound. Given the company's status as a Dividend King, that seems likely to come about at some point in time. I'm happy to wait and collect my growing dividend checks.

Why am I so enamored of an investment that's just muddling along?

Some numbers to watch

The first two numbers worth keeping in mind here are 13% and 6%. The first is the 10-year annualized dividend growth rate, and the second is the most recent dividend increase.

While 13% is better than 6%, both are pretty robust dividend growth numbers for a consumer staples stock. And any longtime dividend payer that increases its dividend 6% while it is facing hard times is making a statement about its confidence in the future.

If, and more likely when, Hormel gets through the current headwinds, dividend growth will probably pick back up toward the longer-term average. And I would also expect the stock to appreciate handsomely as well. But what about those headwinds?

Inflation, the first issue that Hormel is facing, is really an industry-wide problem. The company is having trouble passing on its rising costs to consumers, but given enough time, this should work out. In the meantime, Hormel is focused on cutting costs to protect profit margins.

At the end of the day, inflation is just something that happens in the consumer goods space, and Hormel has successfully addressed it before over the last 50 years, so there's no reason to doubt that it can do so again.

The next big headwind is avian flu. The company's Jenny-O Turkey business has seen strong demand, but it hasn't been able to get enough supply. That's not good, because it depresses sales, but it isn't exactly all bad either. That's buttressed by recent management comments that supply is starting to improve.

While Hormel can't control the avian flu, it appears that the problem is slowly getting better all on its own.

HRL Chart

HRL data by YCharts

The final big issue for Hormel is Planters, which is a recent acquisition. It is notable because Planters was the largest acquisition in Hormel's history.

Management knew when it bought Planters that the brand had been neglected. So a weakening business isn't great -- but it is hardly unexpected, and has been compounded by a generally tough market for nuts.

But Hormel is updating packaging, reworking branding, and investing in advertising. That resulted in volume growth that outpaced the nut category in the fiscal second quarter. That's a good sign of early success with this headwind, and suggests that, with time, Hormel will get this important acquisition moving in the right direction. 

Taken together, I understand why investors are leery about Hormel. It is not performing all that well business-wise, and could easily be described as a fallen angel, given the stock weakness of late. But when you dig down into the problems, they are all either manageable in time or being managed reasonably well already. Thus I've been happy to buy while Mr. Market has been selling.

A multi-year plan

Here's the thing: I've owned Hormel for many years, and through that time I've considered it one of my best dividend growth ideas. The fact that I'm in the green despite the headwinds tells me I'm right even though the market continues to dislike the stock. If you think in decades, like me, this is still a good time to buy Hormel and its historically high 2.7% or so dividend yield backed by a solidly growing dividend.