How Much Did Hormel Foods’ Annual Dividend Rise for Fiscal 2016?

Will Hormel Foods Deliver Strong Earnings Again in Fiscal 1Q16?

(Continued from Prior Part)

Dividend increase

Hormel Foods (HRL) announced a 16% increase in its annual dividend effective fiscal 2016 prior to its fiscal 4Q15 results. The annual dividend has been raised 16% to $1.16 per share to be paid in fiscal 2016. This rise in dividend marked the 50th consecutive annual dividend increase. The first quarterly dividend for fiscal 2016 of $0.29 per share will be paid on February 16, 2016, to stockholders of record at the close of business on January 19, 2016. Hormel has a dividend yield of 1.3%, as of yesterday. The company’s management has been raising its dividend consistently for the last five years. The dividend has risen at an average annual rate of 18.1%.

Synergies and sales of certain businesses

The Specialty Foods segment’s operating income for fiscal 4Q15 included benefits from synergies. Synergies captured within the CytoSport and Century Foods supply chains and a favorable comparison to fiscal 2014 CytoSport acquisition-related costs of $9.3 million drove the operating profit for the segment.

Hormel Foods’ management mentioned it is planning to sell part of the Diamond Crystal Brands business. This sale is expected to take place in fiscal 2016. This business, even though is performing well, doesn’t fit into the company’s strategic priorities. This operation is now classified as “held for sale.” A pretax, non-recurring charge of $21.5 million related to a goodwill impairment of this business was included in the Speciality Foods segment in fiscal 4Q15.

Management’s positive view

Jeffrey M. Ettinger, chairman of the board and CEO, stated, “I am proud of the excellent fourth quarter delivered by our team, achieving record earnings for the tenth straight quarter. We reported record bottom line results for the full year, with fiscal 2015 adjusted net earnings up 19 percent over last year and all five segments registering earnings growth.”

Management also mentioned that long-standing company brands such as Spam luncheon meat, Hormel pepperoni, and Dinty Moore stew strongly contributed to fiscal 2015 results. Also, the recently created or acquired product lines such as Hormel Gatherings party trays, Wholly Guacamole dips, Hormel Natural Choice meats, and Muscle Milk protein nutrition products lent a hand to the performance.

Hormel Foods faced some headwinds during fiscal 2015. Those included lower revenues affected by declining pork markets along with the loss of sales and operational efficiency related to an avian influenza outbreak in the Jennie-O Turkey Store segment.

Hormel’s competitors in the industry include B&G Foods (BGS), Pinnacle Foods (PF), and Cal-Maine Foods (CALM). They have seen year-to-date returns of 5.7%, -3.8%, and 4.6%, respectively, as of yesterday. The PowerShares Dynamic Large Cap Growth Portfolio (PWB) invests 1.3% of its holdings in HRL, and the PowerShares S&P 500 High Quality Portfolio (SPHQ) invests 1.1% of its holdings in CALM.

Browse this series on Market Realist:

• Part 1 - Why Hormel Foods’ Stock Has Risen 17% since Fiscal 4Q15 Earnings

• Part 2 - Will Hormel Foods’ Earnings Growth Continue in Fiscal 1Q16?

• Part 3 - Why Hormel Foods Expects Renewed Revenue Growth in Fiscal 2016