In my continuous quest to find companies which are outperforming the S&P 500, but with less volatility and higher dividend yield, I now have McCormick on my radar screen.
The spice business is quite a racket. Seasonings are expensive - the markup is phenomenal, but people are willing to pay high prices for food flavoring products. As far as I can tell, McCormick has a virtual monopoly on this business in grocery stores in the U.S. McCormick products are the default choice for American consumers, and I think the economy would have to get pretty bad before people stop buying spices. I just learned that MKC also has a substantial presence in Europe.
McCormick has significantly outperformed the S&P 500 but with much less volatility. The shares’ beta is .56. MKC also looks fundamentally cheap for a firm with such a strong growth record. The company just raised the dividend to $.20 per share, noting that results for the first three quarters of this year exceeded their own expectations.
At current prices the shares are yielding 2.07%, compared to the S&P 500’s yield of 1.9%. The company has a good history of increasing the cash dividend regularly in recent years and there have been 2-for-1 stock splits in 1988, 1990, and 1992, and 2002.
The shares have done very well this year and they are less than a point away from their all-time high. But, looking back over several years of data, I see that MKC has a good selloff once or twice a year. I am going to put McCormick on the back burner for now and get on board they next time the shares are on sale.
MKC 1-yr. chart