Dividend Champions: Focus on Food, Beverage and Tobacco

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 |  Includes: BF.B, BOBE, CBRL, CPB, DRI, FLO, GIS, HRL, IFF, JJSF, K, KHC, KO, KOF, LANC, MCD, MKC, MO, PEP, QSR, RAI, SAFM, SJM, SXT, SYY, TR, UVV, VGR, YUM
by: David Fish

The Dividend Champions spreadsheet and PDF have been updated through 2/28/11 and are available here. Note that all references to Champions mean companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years. Together, all of these companies may be referred to using the abbreviation “CCC.”

This is the seventh in a series of articles focusing on specific industries and isolating the CCC companies within those industries. The first six can be found under my articles page, beginning on March 2.

Basic Sustenance and More

It's hard to imagine a more basic necessity than food. No matter what the economic conditions or political situation may be, we all have to eat, and there are many familiar brands of food and beverage that are consumed by millions of people every day. So it shouldn't be a surprise that many of the most familiar food and beverage companies have some of the longest streaks of dividend increases. These firms have had decades to get it right, which means catering to the needs and tastes of consumers around the country and around the world. Four food companies (including Sysco (NYSE:SYY), which is a wholesale distributor) have streaks of dividend increases of more than 40 years, and they are joined by Coca-Cola (NYSE:KO) at 49 years and PepsiCo (NYSE:PEP) at 38, arguably two of the best money-making machines on Earth. So although there is currently some discussion about food inflation, these companies have shown that they can manage their businesses through thick and thin ... including the emphasis on healthier choices, which has led to innovation in most niches of the food industry.

For this article, I'm including the restaurant companies, which simply represent a natural extension of what we consume at home. Although McDonald's (NYSE:MCD) is the only restaurant chain whose dividend-increasing streak has surpassed more than one decade, there are several Challengers that are giving it a run for the money. And the best growth for companies like Yum! Brands (NYSE:YUM) is expected to come from China and other foreign venues, where consumers are embracing fast foods of every flavor. Diners may not be allowed to smoke at most restaurants, but including the tobacco companies is a natural extension of the food and beverage industry, as it still represents personal consumption. Not every investor will find owning a tobacco stock acceptable, of course, and that is their choice.

The Companies

Food, beverage and tobacco companies don't make up a large segment of the CCC universe, with just 29 firms. But many of these stand out because of their long histories of dividend increases. There are a few foreign firms represented, but most of those listed are U.S. companies with substantial foreign operations. The average yield for food and beverage firms is lower than the CCC universe, whereas tobacco companies offer substantially more yield, a trade-off for the “sin” aspect of their operations. Once again, I'm including as many columns of data as is practical, from a perspective of width and significance.

No.

2/28

%

Payout

TTM

NY%

MktCap

DGR

DGR

Company

Symbol

Industry

Yrs

Price

Yield

Inc.

%Ratio

P/E

Growth

($Mil)

5-yr

10-yr

Brown-Forman Class B

BF.B

Beverages

27

69.15

1.85

6.67

42.24

22.82

n/a

N/A

8.9

9.2

Coca-Cola Company

KO

Beverages

49

63.92

2.94

6.82

37.15

12.63

10.05

146,500

9.5

10.0

Coca-Cola FEMSA

KOF

Beverages

7

73.06

1.58

127.56

26.39

16.68

17.77

13,490

30.6

22.3

PepsiCo Inc.

PEP

Beverages

38

63.42

3.03

6.67

48.98

16.18

8.89

100,620

13.7

13.0

Averages for

4

Beverages

30.3

67.39

2.35

36.93

38.69

17.08

12.24

86,870

15.7

13.6

Campbell Soup Co.

CPB

Food

7

33.66

3.45

5.45

49.79

14.45

4.51

11,110

9.8

2.0

Flowers Foods

FLO

Food

9

26.60

3.01

14.29

53.69

17.85

6.92

2,420

24.8

22.1

General Mills

GIS

Food

7

37.14

3.02

14.29

46.67

15.48

8.06

23,610

10.4

6.7

H.J.Heinz Co.

HNZ

Food

6

50.22

3.58

7.14

63.16

17.62

8.41

16,110

8.3

1.5

Hormel Foods Corp.

HRL

Food

45

27.40

1.86

21.43

31.88

17.13

3.57

7,300

10.1

9.1

Int'l Flavors&Fragrances

IFF

Food

8

56.95

1.90

8.00

33.13

17.47

8.20

4,550

7.2

-3.9

J&J Snack Foods Corp.

JJSF

Food

7

43.97

1.07

9.30

18.15

16.98

8.75

817

11.5

n/a

J.M. Smucker Co.

SJM

Food

12

68.84

2.56

10.00

41.51

16.24

5.66

8,150

7.9

25.5

Kellogg Company

K

Food

6

53.56

3.02

8.00

49.09

16.23

8.93

19,600

8.0

4.4

Lancaster Colony Corp.

LANC

Food

48

57.72

2.29

10.00

35.48

15.52

6.54

1,590

4.0

6.6

McCormick & Co.

MKC

Food

25

47.65

2.35

7.69

40.73

17.33

8.87

6,340

10.2

10.6

Sanderson Farms Inc.

SAFM

Food

9

41.35

1.64

13.33

18.13

11.03

175.68

913

8.1

16.6

Sensient Technologies

SXT

Food

6

33.38

2.52

5.00

38.71

15.38

9.05

1,650

5.7

4.0

Sysco Corp.

SYY

Food

41

27.79

3.74

4.00

53.61

14.32

7.85

16,190

10.8

15.3

Tootsie Roll Industries

TR

Food

45

28.60

1.12

3.00

34.78

31.09

8.99

1,630

3.0

3.0

Averages for

15

Food

18.7

42.32

2.47

9.40

40.57

16.94

18.67

8,132

9.3

8.8

Bob Evans Farms

BOBE

Restaurants

5

31.34

2.55

11.11

43.01

16.85

10.65

950

9.6

7.8

Cracker Barrel Old Ctry

CBRL

Restaurants

8

49.84

1.77

10.00

22.22

12.59

12.71

1,160

10.8

45.0

Darden Restaurants

DRI

Restaurants

6

47.13

2.72

28.00

41.56

15.30

12.76

6,510

36.6

35.8

McDonald's Corp.

MCD

Restaurants

34

75.68

3.22

10.91

53.28

16.52

9.56

79,960

27.5

26.5

Tim Hortons Inc.

THI

Restaurants

6

44.09

1.54

30.77

18.58

12.05

17.65

7,510

n/a

n/a

Yum! Brands Inc.

YUM

Restaurants

7

50.33

1.99

19.05

42.02

21.15

11.93

23,530

32.6

n/a

Averages for

6

Restaurants

11.0

49.74

2.30

18.31

36.78

15.74

12.54

19,937

23.4

28.8

Altria Group Inc.

MO

Tobacco

42

25.37

5.99

8.57

81.28

13.57

7.35

52,990

14.8

11.7

Reynolds American Inc.

RAI

Tobacco

7

34.32

6.18

8.16

111.58

18.06

6.77

20,010

11.9

9.0

Universal Corp.

UVV

Tobacco

40

41.82

4.59

2.13

35.89

7.82

n/a

981

2.3

4.2

Vector Group Ltd.

VGR

Tobacco

13

16.89

9.47

5.00

219.18

23.14

n/a

1,270

5.0

7.2

Averages for

4

Tobacco

25.5

29.60

6.56

5.97

111.98

15.65

7.06

18,813

8.5

8.0

Averages for

29

FoodBevTob

19.7

45.56

2.98

14.56

49.37

16.53

15.62

20,624

12.6

12.5

Averages for

447

CCC Co's

16.7

47.91

2.91

8.20

68.18

21.94

12.39

16,745

12.5

10.3

Click to enlarge

Summary

The Food, Beverage and Tobacco industries include many long histories of annual increases. Unlike the subjects of the first two articles in this series (MLPs and REITs), the taxation on these dividends is fairly straightforward, at the 15% (or lower) rate until at least the end of 2012. I expect that to be the case with future installments in this series that will focus on other industry/sector groups. As always, I welcome feedback in the comments section below.

Next Up: Industrials

Disclosure: I am long KO, PEP, HRL, MKC, MO.