Dividend Investing For The Sweet Tooth

Includes: HSY, KHC, LNCE, MDLZ, TR
by: Divhut

Do you have a sweet tooth? Are you constantly craving the sweet taste of cookies, candies, biscuits or chocolate? Have you ever thought about some of the companies that produce your favorite sweet treats? Well today I want to share with you five dividend paying companies that deliver sugary quarterly payments that’s sure to satisfy those sweet tooth cravings.

First up is fairly recent Kraft (KRFT) stock spin off Mondelez International, Inc. (NASDAQ:MDLZ). MDLZ, known for many of its sweet offerings, including Cadbury, Oreo, Milka, Trident and LU biscuits, to name a few, offers a relatively low yield at 1.50% with a low payout ratio of only 32.6%. By any measure this dividend remains safe based on current cash flow. In terms of PE, MDLZ has a forward valuation of 19.2 making it pretty much fully valued at current prices. MDLZ represents much higher international growth from its snack foods business compared to parent Kraft which may explain the relatively higher PE. Investors always love to pay for future growth.

Next is a candy company that really needs no introduction as its namesake product has surely been eaten at least once by all of us, Tootsie Roll Industries Inc. (NYSE:TR). Besides its widely known namesake product TR also produces Charms, Blow Pops, Dubble Bubble, Charleston Chew, Sugar Daddy, Sugar Babies and of course the ever popular Junior Mints, to name a few. While you might be familiar with some or all of the Tootsie Roll candy products you might not know that TR is also a coveted dividend aristocrat having paid rising dividends every year for over 48 years! TR currently yields a low 1.10% but has managed an average 8.60% annual dividend growth rate for several decades. TR has a payout ratio of only 31.2% for the trailing twelve months which means it can continue to pay out an increasing dividend in the future. While TR has a long dividend history, it remains quite pricey as the current PE stands at 28.5, which is very rich compared to the S&P and its peers.

Of course, when talking about candies and sweets one cannot forget chocolate giant The Hershey Company (NYSE:HSY). HSY has a long dividend history going back several decades with rising dividends going back four plus years. We are all familiar with HSY’s famous namesake product but did you know The Hershey Company also produces many famous candies such as Twizzlers, Jolly Rancher, and Ice Breakers and Reese’s, to name a few. Currently offering a moderate yield of 2.00% with an equally moderate payout ratio of 47.2%, HSY has room to continue growing its dividend based on current cash flow. HSY has also been a great dividend grower over the years, having increased its dividend every year for three decades except during the financial crisis in 2008 – 2009 when dividends were held steady. Still, despite missing a couple years of dividend growth HSY managed to deliver a very high 10.26% annual dividend growth rate. HSY seems to be another quality company that is richly valued with a PE of 26.7. Better wait to pull the trigger on this one.

Our next sweet tooth company may need a little introduction, Snyder’s-Lance, Inc. (NASDAQ:LNCE). You might know their namesake pretzel product Snyder’s of Hanover but did you know that LNCE also produces sugar wafers and Stella D’oro cookies along with many other salty snacks too. LNCE currently pays a decent yield of 2.40% with a moderate payout ratio of 52.5%. Though LNCE has been paying a dividend for over 25 years, it is not a traditional dividend grower having kept dividend payments steady for many, many years. On a valuation basis LNCE currently has a PE of 25.3 also making this stock a little too rich at current prices.

Finally, another great, sweet, dividend paying food company that needs no introduction is Kraft Foods Group, Inc. KRFT’s sweet products include Jell-O, Cool Whip, Jet-Puffed, Kool-Aid, Country Time and Capri Sun, to name a few. KRFT currently yields a high 3.60% with a moderate payout ratio of 65.6%. Perhaps one of the best things going for KRFT these days is its low PE of only 12.83, putting it below the S&P and its peers, making it a relative bargain in today’s high valuation market. Granted KRFT does not have the high growth prospects like its spin off MDLZ, but it does represent decent value in the market today.

Looking to sweeten your portfolio with some of the mentioned dividend stocks? Let me know if you have or plan to buy any of these sweet dividend payers.

Disclosure: Long MDLZ, KRFT