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Recent Buys

Recent Buy – Hormel Foods (HRL)

Hormel Foods    With the current bull market roaring, it is harder to find value. Many stocks are up near their 52 week highs and not budging much. It has been a few months since my last buy. This period has given investors a little time to build up some capital and wait for opportunities to present themselves. While the market is mostly up, lately it has come down a few notches. That is good news for investors looking to make their next purchase. I am happy to post my second buy of the year. I purchased 30 shares of Hormel Foods (HRL) at $34.00. This is a completely new company I am adding to my portfolio. See more company stats below.

 

HRL Stats

Annual Dividend: $.68

Yield: 2.00%

Years Paying/ Increasing: 50 years

Dividend increase from prior year 14.7%

Payout Ratio: 40.7%

P/E Ratio: 20.59

EPS: $1.65

 

    You might be thinking, why HRL? It isn’t a very attractive looking stock. The dividend amount and yields are low and the earnings are average or sub-par. That’s correct, other companies out there have a way higher dividend yield and may look great on paper. But we must look big picture at HRL.

 

    They have positioned themselves quite well for long term growth. While the dividend itself may be small, the growth rate is very large at almost 15%. And with a 50 year track record of paying or increasing dividends that will pay off in the long run. Secondly, the payout ratio is only 40% which means they should be able to continue to pay and increase their dividend by that incredible growth rate.  Lastly, the sector they belong to does not change very much. So I have peace of mind holding it long term knowing a competitor can’t easily come from nowhere and take over all of the market share. People purchase from this sector regardless of the economic condition so earnings will most always be present. Also, from a consumer’s standpoint, I personally buy their products so I know it has quality behind the numbers.

 

    As stated above, HRL has a dividend yield of 2% or $.68 annually. This will add another $20.40 to my yearly dividend income. Do you like HRL? Are there any other companies that are on your watch list that look appealing? Have you purchased any other stocks recently?

 

14 Comments

  1. I like the buy a lot. I just started a new position in HRL myself this month and looks like many of the food staples are selling at much better prices and yields too. HRL at 2% will continue to interest me going forward. I do like HRL long term and think they will continue to acquire more companies in the organic/health/fresh sector to complement their processed meat biz.

    1. Yeah I saw you bought some as well as a few others. They should be great to hold long term. That’s the hope, they can keep acquiring and continue to grow. As always, thank you for the comment.

  2. Hi, thanks for the post. HRL was not really on my radar but I will have a second look! Need to research their ‘healthy’ strategy a bit more as I believe that processed meat consumption is going down.

    Cheers,
    Tall Investing

    1. That may be that the meat consumption rate is going down, but they have been acquiring a few companies to diversify them to make up for it. Hopefully this will continue to help provide growth and diversification. Thanks for your comment!

    1. Thanks! I’m happy with it. Not the most attractive stock so many people avoid it. But it should be a good long term hold. Thanks for the comment.

  3. In terms of value, I think Apple is pretty good. Apple has a pretty good P/E ratio, and it’s basically just a cash cow at this point. Buffett thinks Apple will conduct share buybacks, which will be good for its stock price.

    1. I like AAPL as a stock. They may have a lower yield dividend but the growth rate is high making up for it. And with all of that free cash sitting there, they can maintain the increases for some time. Thanks for your comment.

    1. Nice! With that safe dividend and impressive growth rate, HRL should be a nice long term hold. Thanks for stopping by.

  4. Definitely considering adding HRL to my portfolio with my tax return money. I hate the fact that the yield is low, but I do like the fact that the stock price is right.

    Thanks for the break down. HRL seems to be a very popular stock in the DGI community.

    1. Yeah I agree. Within the last few weeks I have seen many members of the community pick some up due to the current price/ value. The yield may be low now, but over time it will rise since its dividend growth rate is so high. Thanks for the comment and good luck with your next purchase.

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