Hershey Kisses Off 3000 Workers

| About: The Hershey (HSY)

The Hershey Company (NYSE: HSY) has established a sweet spot for itself in rural Pennsylvania. With a town named after the company, and a Hershey-themed amusement park, few companies are as much a part of Americana as The Hershey Company. Hershey sales currently account for more than 42% of all the chocolate sold in the United States. Now, however, Hershey is eliminating 3000 jobs in the United States and Canada as it shutters 6 plants, according to an Associated Press report. Operations from the closing plants will be moved overseas as operations in Brazil, Mexico, India and China are expanded.

The Hershey Company cites the need to remain competitive as the reason for the closings. Hershey will be closing factories in Connecticut, Pennsylvania, California, and three in Canada. The Hershey Company’s biggest rival is the privately owned Mars Company which controls about 30% of the US market. In recent years, Mars has been gaining ground on Hershey. When I say gaining ground I mean that in two ways. First, their market share has been growing while Hershey’s declines, and secondly, Mars has opened the Dove Center for Chocolate Excellence just ten miles from Hershey’s corporate headquarters. Mars says about 330 workers will be employed in the new facility which is located in Elizabethtown, Pennsylvania. So while Hershey closes one Pennsylvania plant, Mars is hiring just down the road.

Actually, truth be told, Mars is much larger than Hershey when global sales and candy other than chocolate is considered. Hershey’s sales total about $5 billion annually compared to The Mars Company’s $22 billion. Mars also employs 48,000 people worldwide compared to about 12,000 who work for Hershey.

Hershey stock has been falling for the last few weeks, like most stocks. Just a few weeks ago, on September 18th, Hershey stock closed at $42.73 per share. Yesterday’s close was just over $34 as the company looks poised to test its 52 week low of $32.48 which it hit previously in July of this year. On September 30th, however, the company declared its 316th consecutive quarterly dividend. Paying $0.2975 per common share annualizes to a yield of 3.4% at the current price.

With the volatility and uncertainty of today’s market, many investors are looking twice at stocks with secure dividend payments. If the share prices can’t be counted on for growth in the short or medium term, then dividend yields may be able to keep portfolios above water until the economy and share values recover. Hershey’s full quarterly report will be released Thursday, October 16th. With pressure from Mars, and very weak consumer spending, it’ll certainly be worth waiting for those results before making a decision either way about buying Hershey’s dividend. The date of record for this dividend payment is November 25th, so there’s no need to rush.

Note that the share price outlook for dividend paying stocks should not be overlooked, after all a 3% yield while the share price drops 10% doesn’t add up in the investor’s favor. However, on those stocks with borderline cases, the dividend can make the difference.

Disclosure: none