The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company is a member of the dividend achievers index, and has boosted distributions for fifteen years in a row. The company’s last dividend increase was in July 2012 when the Board of Directors approved an 8.30% increase to 52 cents/share. The company’s largest competitors include Conagra (CAG), Kraft (KFT) and Hershey (HSY). Over the past decade this dividend growth stock has delivered an annualized total return of 11.60% to its shareholders.
The company has managed to deliver an 8% average increase in annual EPS since 2003. Analysts expect J. M. Smucker to earn $5.15 per share in 2013 and $5.65 per share in 2014. In comparison, the company earned $4.06/share in 2012.
The return on equity has decreased 13.70% in 2003 to 8.70% in 2012. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual
dividend payment has increased by 11.10% per year over the past decade, which is much higher than the growth in EPS. This was achieved mainly through the expansion in the dividend payout ratio.
An 11% growth in distributions translates into the
dividend payment doubling almost every six and a half years. If we look at historical data, going as far back as 1997 we see that J. M. Smucker has actually managed to double its dividend every seven and a half years on average. The dividend payout ratio has increased from 37.60% in 2003 to 46% in 2012. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, J. M. Smucker
is slightly overvalued, trading at 21.10 times earnings and yielding 2.40%. I would consider adding to my position in the stock on dips below 81.50/share.
Full Disclosure: Long PG
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