As a result of the economic crisis, more Americans are choosing to eat at home, which has ultimately led to a more profitable and growing spice and seasonings retail product category. Headquartered in Maryland, McCormick & Co. (NYSE:MKC) is a market leader with a diversified product portfolio that includes, the namesake brand McCormick, Lawry’s, Simply Asia, Ducros, Vahine, Billy Bee, Old Bay, and more. In addition, the company operates two synergistic business lines: consumer and industrial. The consumer segment enjoys higher margins, while the industrial line benefits from significant volume increases.
McCormick’s shareholders have benefited from twenty-five consecutive years of dividend increases and recent powerful acquisitions. The company has also paid dividends every year since 1925. Moreover, McCormick generates satisfactory free cash flow to sustain present debt levels, future dividend increases, and tag-on acquisitions. McCormick’s long-term debt level could be lower; however, the company does boast a Standard and Poor’s long-term debt rating of A-, which is rather impressive considering its peer group.
Furthermore, Alan Wilson, CEO since 2008, firmly asserts,
Our passion for flavors sets the direction for our acquisition strategy, which remains a key growth initiative. […continuing…] Going forward we will continue to build our portfolio of great brands with acquisitions both in developed and emerging markets.
The company does maintain two classes of common stock: both voting and non-voting. Although the voting represents only 10% of McCormick’s market capitalization, it maintains all the voting power. Takeovers are highly unlikely for this company as approximately 40% of the voting stock resides with the company’s retirement plan and two former CEOs. Altogether, this benefits shareholders as McCormick’s management team truly behaves as if they were owner-managers.
To further showcase the company’s able and trustworthy management, current CEO Alan Wilson, who has been an employee at McCormick since 1993, proudly affirms in an interview with the University of Tennessee Alumni Association, “McCormick is a great place to work. I’m young enough to have a lot of energy, and I want to enhance the company’s top-tier industry status.”
Accordingly, with a price tag of $43.60 and 16.57 P/E, MKC is moderately attractive and could add a quite satisfactory low double-digit return to the conservative investor’s long-term portfolio. After all, with limited downside risk and a robust management team, McCormick common stock might be worth the bet.
Disclosure: The author has no positions in MKC at the time of writing.