Shareholders of Hershey (NYSE:HSY) got to read a sweet headline the other day: "Hershey Announces Increased Dividends." The chocolatier increased its common stock quarterly payout 11.4% to $0.245 per share and its Class B common stock payout 10% to $0.22 per share. Not bad.
Checking the company's website for investor relations (something you should always do when you're thinking about buying into a company), we see that Hershey has been pretty good about raising its dividend over the past several years. In 1997, Hershey paid out a total of $0.42 in dividends; in 2005, stockholders should receive $0.93. The investor income per share has more than doubled in eight years. That's as sweet as a Reese's cup!
Let's do a little more digging. Check out the 10-K filing the company made this past March, reporting on the period ending Dec. 31, 2004. There's a superbly informative financial database on page 9, where various statistics describe the company's general health from 1999 through 2004. Let me share some reported five-year compound growth rates that stick out:
- Net sales revenue, up 4.3%.
- Net income, up 5.1%.
- Dividends paid on common stock per share, up 10.8%.
- Cost of sales, up 2.6%.
- Selling, marketing, and administrative, up 4.7%.
- Long-term portion of debt, down 4.7%.
What's more, Hershey generated a little more than $600 million in free cash flow in 2004 -- more than enough to cover the $167 million for business acquisitions and the $206 million for dividends. The company's not a fast-growing tech play by any means, but it is dependable.
Overall, Hershey seems to be an excellent idea for serious investors who plan to buy stocks for the very long term, faithfully reinvesting dividends and adding on dips along the way. Looking at a long-term chart shows just why that's a good approach with this company. Hershey is one of those companies that Peter Lynch (as well as Fools) just love: great brand, long history, familiar products, spits out cash.
Covering Hershey's recent quarterly earnings release, Nathan Slaughter found that leverage of key brands continues to provide growth in earnings, with adjusted earnings for the quarter climbing 18.2%. But he also noted that even though the business was performing well, there's a premium that comes with such a well-known, big brand-equity company: a PEG ratio way over 2, which might make you want to wait for some sell-offs before initiating a position.
Dividends are the rage these days. Rick Munarriz recently looked at a few stocks that have raised their payouts, and I exploredKellogg's (NYSE:K) first increase in quite a while. Keep hunting for those dividend raisers -- and if you need help with income ideas, the Motley Fool Income Investor newsletter will definitely offer some rich suggestions.
More sweet Takes on Hershey:
You can also post your opinions at the Fool's Hershey discussion board.
Fool contributor Steven Mallas owns none of the companies mentioned. He also can't wait for Halloween. The Fool has a disclosure policy.
