|Conagra Foods Inc Sr Nt 3.25% 9/15/2022, Make Whole Call (cusip: 205887BJ0) sinking fund protection, not call protected||Baa2/BBB||$99.60||3.29%|
These bonds have been trading between 3.308% and 3.35% yield. ConAgra also has 9/15/2030 bonds on the market that yield 5.21%.
|Conagra Foods Inc Nt 8.25% 9/15/2030 (cusip: 205887AX0) sinking fund protection, not call protected||Baa2/BBB||$135.20||5.21%|
|Senior long-term debt (noncurrent)||$2.6B||$2.6B||$3B||$3.2B||$3.1B|
|Subordinate long-term debt (noncurrent)||$195M||$195M||$195M||$195M||$200M|
These figures do not include the new $750M in debt issued. In order to size up ConAgra's new debt, here are a couple of bonds from competing food companies, Kellogg (NYSE:K), Smuckers (NYSE:SJM) and Wal-Mart (NYSE:WMT):
|Kellogg Co Sr Nt 3.125% 5/17/2022 (cusip: 487836BJ6)||Baa1/BBB+||$103.01||2.76%|
|Smucker J M Co Sr Nt 3.5% 10/15/2021 (cusip: 832696AB4) sinking fund protection, not call protected||A3/BBB+||$109.56||2.32%|
|Wal-Mart Stores Inc Deb 6.75% 10/15/2023 (cusip: 931142AU7) sinking fund protection, call protected||Aa2/AA||$135.66||2.95%|
Investors could consider diversifying into two bond positions instead of just one. In this instance, the ConAgra bonds have a better yield than Kellogg, Smucker and Wal-Mart. However, these companies have better credit ratings than ConAgra.
To put this in perspective, you could compare these bonds to higher yield Ford Motor Credit Co. LLC bonds. However, realize Ford's credit rating is just one notch above junk. Therefore, a strategist might consider one lot of ConAgra bonds, one lot of Wal-Mart bonds (for quality) and one lot of Ford bonds (for yield.)
|Ford Motor Credit Co LLC Nt 5.75% 02/01/2021 (cusip: 345397VR1) sinking fund protection, call protected||Baa3/BB+||$111.61||4.09%|
As a result of the QE3 announcement yesterday, the stock market has soared. As the stock market goes up, bond prices are falling. It is very important to consider allocation size, market direction and use of income. Consider IRA versus non IRA tax implications and the rate of inflation.
If an investor holds these bonds in an IRA and uses the fixed income to go into inflation protected funds and favored stocks, the overall yield should be greater. Of course, this depends on performance. However, an investor who holds bonds in a non IRA and has no plans to designate income would likely not see the same returns, due to taxes and inflation.
Like any investment, bonds carry risk, including the risk of default. Individuals should consult a financial advisor to determine what size allocation, if any, would meet your financial objectives. This article is not a recommendation to buy. If you have any thoughts regarding ConAgra Corp. bonds, please comment below.
Disclosure: I am long CAG, F, KR, WMT, and I am considering long investments in ConAgra, Ford Mtr Credit Co. and Wal-Mart Corp. bonds. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.