The perfect portfolio is like a well-balanced meal. There's the meat (undisputed juggernauts like Coke or Amazon) and the vegetables (companies that are beneficial in the long run, but hard to swallow at the moment). But to make the whole thing taste like something fun, you need a little bit of spice -- the dividend. Conveniently enough, spice company McCormick (MKC 0.38%) provides both seasonings and payout, but how does its dividend compare to those of other food industry heavyweights?
A seasoned stock's dividend
While it has already made itself a staple of the food industry, McCormick continues to take huge strides for increased growth. In 2011, it acquired international spice brands Kamis and Kohinoor, and launched a string of new products that, according to its 10-K, added 9% to its total sales for 2011. A self-proclaimed "leader in flavor," its brands reach consumers in 110 countries, and it is a market share leader in its primary sales categories.
McCormick began paying dividends in 1981, starting at $0.17. Since then, the price has fluctuated from $0.11 a quarter in 2002 (partly due to stock splits), to its present high of $0.31, or $1.24 annually. Not only did the company's dividend weather the Great Recession, but it also actually rose 9% from November 2008 to March 2009, just when things were at their worst. McCormick has thrived in the face of economic onslaught, and now, with upcoming Thanksgiving dinners needing their fixin's, there seems no reason the spice giant won't continue to succeed -- at least in the short term.
While McCormick may be the only publicly traded company in town when it comes to spices, it still faces arch competition from the likes of Heinz (HNZ). Founded 110 years ago, and public since 1972, Heinz has survived its fair share of recessions, and a Great Depression on top of that. This company's current stock price now trades close to its record high.
Also nipping at McCormick's heels are Rocky Mountain Chocolate Factory (RMCF -0.42%), with a quarterly dividend that has grown from $0.03 to $0.11 since 2003, and Flower Foods (FLO -0.60%), whose payment started out at $0.01 in the '80s and has since risen to $0.16. Let's see whether these companies have the same financial flavor as McCormick.
|
Company |
Net Annual Income |
P/E |
Net Profit Margin |
Payout Ratio |
Dividend Yield |
|---|---|---|---|---|---|
|
McCormick |
$3.697 billion |
22.44 |
10% |
43% |
2% |
|
Rocky Mountain Chocolate |
$34.627 million |
15.78 |
11% |
69% |
4.3% |
|
Heinz |
$11.649 billion |
20.01 |
8% |
72% |
3.5% |
|
Flower Foods |
$2.773 billion |
24.14 |
4% |
70% |
3.2% |
Source: Company 10-Ks.
Looks like being a synonym for ketchup has paid off in spades for Heinz. Its quarterly payout was already four times that of McCormick's by the time the spice giant introduced a dividend in 1990. McCormick's dividend has risen each consecutive year since then, while Heinz saw some fluctuation in price from 2002-2003. Despite a bit of wavering, the ketchup company currently offers nearly $0.20 more per quarter than McCormick. However, the payout ratios of this chart suggest that the spice company has plenty of room to grow from here, while the ketchup kingdom may get tapped out sooner.
Foolish bottom line
Heinz may be the Coke of ketchup, but McCormick's shareholders have reason to hold tight to this tasty dividend. Should the spice giant's solid financials continue to stay strong, this could be a very interesting stock for the seasoned dividend investor to watch.
