Recently made my first purchase for this month. I've had a handful of companies on my shortlist of potentials buys and most of them are companies I have a current position in, such as J.M. Smucker. This company is back down near their 52 week lows and the industry as a whole is out of favor with Wall Street. SJM along with GIS have made some acquisitions recently to spur some growth and questions remain surrounding the price paid versus value received. See below for the details of the purchase along with some additional notes regarding valuation and purchase.
Purchased: 12 shares x $101.55 = $1,218.16 (+$4.95 commission)
Dividend Income: $40.80 annually ($3.40/sh annually; paid quarterly in Mar, Jun, Sep, Dec).
Forward P/E vs. S&P Forward P/E: 10.5 vs. 18.09 for S&P (per WSJ)
Debt to capital < 50%: Yes, 37.0%
Interest coverage ratio of at least 3:1: Yes, 5.9x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: No, BBB
Current dividend yield > 1.5x S&P yield: Yes, 3.34% vs. S&P 1.8%
Payout ratio < 60% (or <85% for utilities): Yes, 35%
Dividend King or CCC classification: Contender (18 years of consecutive dividend increases)
Comments: Next week the company is hosting its investor day and so more information I am sure will be shared on what the company's expectation is for both near and long term plans regarding growth and capital allocation. I am looking forward to hearing what management will share. In the meantime, the current earnings yield of 9.52% and corresponding dividend yield, which appears very safe, are hard to ignore even if investors have to wait a year or two see some decent growth materialize. Perhaps the company will begin to give a bit more attention to international markets. Furthermore, during economic downturns, I don't notice folks making very many changes to their diets with regards to the categories seen below, where SJM holds the leading market position. If anything, during the next recession, perhaps folks will forego their daily Starbucks cup and switch to Folgers (who doesn't remember their jingle, especially around the holidays - "The best part of wakin' up...is Folgers in your cup"). Admittedly, neither myself nor my parents while growing up are/were coffee drinkers, but I vividly remember the Folgers commercials. I am, however, a consumer of many of their remaining brands, particularly the Adams peanut butter as between the two of us, my wife and I literally make dozens of PB sandwiches each week for our 5 kids 😲 and I of course enjoy PB in my protein shake many mornings.
Dividend Income: $40.80 annually ($3.40/sh annually; paid quarterly in Mar, Jun, Sep, Dec).
Forward P/E vs. S&P Forward P/E: 10.5 vs. 18.09 for S&P (per WSJ)
Debt to capital < 50%: Yes, 37.0%
Interest coverage ratio of at least 3:1: Yes, 5.9x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: No, BBB
Current dividend yield > 1.5x S&P yield: Yes, 3.34% vs. S&P 1.8%
Payout ratio < 60% (or <85% for utilities): Yes, 35%
Dividend King or CCC classification: Contender (18 years of consecutive dividend increases)
Comments: Next week the company is hosting its investor day and so more information I am sure will be shared on what the company's expectation is for both near and long term plans regarding growth and capital allocation. I am looking forward to hearing what management will share. In the meantime, the current earnings yield of 9.52% and corresponding dividend yield, which appears very safe, are hard to ignore even if investors have to wait a year or two see some decent growth materialize. Perhaps the company will begin to give a bit more attention to international markets. Furthermore, during economic downturns, I don't notice folks making very many changes to their diets with regards to the categories seen below, where SJM holds the leading market position. If anything, during the next recession, perhaps folks will forego their daily Starbucks cup and switch to Folgers (who doesn't remember their jingle, especially around the holidays - "The best part of wakin' up...is Folgers in your cup"). Admittedly, neither myself nor my parents while growing up are/were coffee drinkers, but I vividly remember the Folgers commercials. I am, however, a consumer of many of their remaining brands, particularly the Adams peanut butter as between the two of us, my wife and I literally make dozens of PB sandwiches each week for our 5 kids 😲 and I of course enjoy PB in my protein shake many mornings.
This is a great company and purchase PIV. Love this company and have always had my eye on it. I just never pulled the trigger and invested for some reason. But the metrics look great right now. Congrats!
ReplyDeleteBert
Thanks Bert! I've keeping on eye on many of the names in the sector and although many appear to be trading as very reasonable valuations, SJM is one of the most compelling IMO.
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