If you're the kind of investor who prefers to bet on the
tortoise rather than the hare, thenHormel Foods (
) is a candidate for your portfolio.
Steady is Hormel's game. In the past 19 fiscal years ended in
October, earnings declined only three times and revenue only
twice. The five-year EPS Stability Factor is 8 on a gauge that
runs from 0 (calm) to 99 (wild).
might have another reason to favor Hormel. The company is mostly
a U.S. story. Last year, 6% of revenue was from international
With questions about Europe's stability and China's economy,
the U.S. focus might have appeal.
Recently, Hormel made a splash in the news with the
acquisition of Skippy peanut butter. Many noted correctly that
this will help Hormel's exposure in China. But by itself, the
bump is modest. The acquisition is expected to initially nudge up
Hormel's international exposure by only 1% or so.
What's more interesting, perhaps, is that the buy fits
Hormel's conservative approach. Skippy is already the No. 1 brand
in China. So Hormel has bought a proven winner. It's not as if
the company is trying to change China's taste buds.
Skippy, however, could become the gateway product to
establishing other Hormel products in China through
cross-merchandising. It's easier to piggyback brands onto
successful known brands than to start from scratch.
Hormel's other products include La Victoria salsa, Dinty Moore
stews and Spam canned meat.
Could Spam take China by storm?
In a way, it already has. Given China's scandals with tainted
domestic foods, the American brands enjoy a better reputation. As
Bloomberg BusinessWeek reported in 2011, Hormel tweaked the Spam
recipe for Chinese tastes and is getting a premium price for
Hormel's joint ventures in China began in the 1990s.
Hormel raised the quarterly dividend in November from 15 cents
a share to 17 cents. The company has increased the payout for 47
years in a row. The annualized yield is 2%.
Fund ownership has held fairly steady in the past four
quarters, ranging from 34 million shares to 37.9 million