Earnings stability is a key factor for dividend stocks.
J.M. Smucker (
) has three- and five-year EPS Stability ratings of 4 and 6. The
scale runs from 0 (calm) to 99 (wild).
The quarterly dividend was recently raised from 48 to 52 cents
a share. The payout has more than doubled since early 2006, and
the current yield is 2.4%.
The company makes and markets branded food products, including
Jif peanut butter, Hungry Jack, Crisco and Pillsbury
Smucker recently reported results for fiscal Q1 ended in July.
Earnings grew 4%, which topped views by 17%. Sales advanced
Sales and profits are usually highest in the fall and holiday
baking periods, which for Smucker is fiscal Q2 ending in October
and fiscal Q3 ending in January. Most sales are in the U.S. and
The stock recently broke out of a cup base in four times its
usual volume. The buy point was 82.07. Smucker remains in a buy
zone up to 86.17.
The Composite Rating, which combines all five IBD ratings into
a single number, is 96.
Investors should be aware of three factors.
The company is growing partly because of acquisitions. In 2008,
Smucker merged with Folgers Coffee. In 2011, Smucker grabbed
privately held Rowland Coffee Roasters, acquiring some leading
Hispanic brands. In January, the company bought Sara Lee's food
service and hot beverage business. In March, Smucker bought
China's Guilin Seamild Biologic Technology, a maker and marketer
of oats products.
Smucker's sales have more than doubled since 2008.
Smucker's top 10 customers account for about 60% of net sales.
Making up 26% of sales,Wal-Mart Stores (
) is the No. 1 customer. Consolidation within the grocery
business has trimmed the customer count. But consolidation also
puts downward pressure on Smucker's prices.
The severe drought in the U.S. is driving up commodity costs for
Smucker's. While some costs can be passed on via price increases,
inflation makes private labels attractive vs. branded labels.