Tomato-Based Progress at Heinz

Recent restructuring efforts at Motley Fool Income Investor selection H.J. Heinz (NYSE:HNZ) appear to have taken a solid hold on the food firm -- the kind of firm grip that's sometimes needed to get the sauce moving from its iconic Heinz Ketchup bottles. If the past couple of quarters are a sign of things to come, Fools would be wise to consider an extra serving of Heinz in their portfolios.

Third-quarter results released Tuesday were strong across the board, with total sales improving 5% and reported earnings advancing an impressive 69%. Management stated that bottom-line continuing operations gains grew 32% and projects full-year earnings growth of 12%-14%.

So far this year, North American consumer product sales are growing faster than international sales, where Europe is currently the laggard. North America is the largest region in terms of sales, but most sales are made globally -- led by Europe, with Asia/Pacific accounting for about 13% of sales. Operating income grew in all regions for the first nine months of fiscal 2007, with a notable 27% increase in Europe.

Heinz and Unilever (NYSE:UL) have a substantial international flavor to their food sales. Both are seeing positive results from restructuring efforts in recent years, having jettisoned underperforming and low-margin businesses to focus on core, strategic brands. For Heinz, this includes its namesake products as well as Classico pasta sauce and Smart Ones meals. The company is the self-proclaimed "world's largest provider of ... tomato-based products" and intends to maintain its red-tinted dominance for years to come.

Based on guidance for 2007, shares of Heinz are trading at just more than 19 times earnings. That's not a steal, but it compares well to other food firms, including Sara Lee (NYSE:SLE), Kraft (NYSE:KFT), and Kellogg (NYSE:K). Heinz also pays a juicy 3.1% dividend yield. The best strategy may be to consider investing in a basket of food companies. It's hard to identify characteristics that clearly set one apart from the others, but the industry as a whole does have a number of appealing investment merits, including higher-than-average dividend payments and operating stability during the inevitable ups and downs in the business cycle.

For related Foolishness:

• Feeling Saucy With Heinz: Fool by Numbers
• Fool on the Street: Healthy Heinz
• A Food-Stock Sampler
• Heinz Bottles Recent Gains

Heinz, Unilever, and Kraft are all Income Investor selections, while Sara Lee was a former pick. To see what other great dividend-paying companies have been recommended to subscribers of the market-beating newsletter, take a free 30-day trial. Your hamburger (and portfolio) will thank you.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.