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Grocery (Or Consumer Staple) Update 8-22-14

Grocery Portfolio 08-22-14

The Q2-14 dividend is used for yield calculations. The second Div/EPS ratio has the 2015 EPS projection as the denominator. "Div 1 yr" measures the change in the dividend since Q2-13. "Div 5 yr" measures the average change in the dividend since Q2-09. FLO announced a dividend increase for Q2-14, which was only 3 quarters after the last increase. The last increase was only 6.67%. FLO's last three dividend increases have been well below trend.


    12-31-12 08-22 Div Current Div/ Div/ Percent Change
Company Price Price /Quarter Yield EPS14 EPS15 Price Pr+Div EPS14 Target Div 1yr Div 5yr

ArchDanMidlnd (NYSE:ADM) 43.40 49.14 0.240 1.95 31 % 27 % 13.23 14.33 -6.15 17.35 26.32 14.29
Campbell (NYSE:CPB) 43.28 44.01 0.313 2.84 49 % 49 % 1.69 3.85 1.20 0.93 7.76 5.00
Coke (NYSE:KO) 41.31 41.12 0.305 2.97 59 % 55 % -0.46 1.02 -6.73 0.89 8.93 9.76
ConAgra (NYSE:CAG) 33.70 31.85 0.250 3.14 46 % 42 % -5.49 -4.01 -7.26 -16.91 0.00 6.32
Colgate (NYSE:CL) 65.21 64.57 0.360 2.23 49 % 44 % -0.98 0.67 -4.52 3.40 5.88 12.73
Ingredion (NYSE:INGR) 68.46 78.08 0.420 2.15 30 % 28 % 14.05 15.89 -3.66 7.59 10.53 40.00
Clorox (NYSE:CLX) 92.76 89.21 0.710 3.18 64 % 60 % -3.83 -1.53 -2.64 -1.82 10.94 10.87
Flowers (NYSE:FLO) 21.47 19.18 0.120 2.50 51 % 44 % -10.67 -9.55 -9.52 3.09 12.46 15.98
General Mills (NYSE:GIS) 49.91 52.71 0.410 3.11 58 % 54 % 5.61 8.07 -2.08 3.90 24.24 14.89
Hershey (NYSE:HSY) 97.23 91.99 0.485 2.11 48 % 43 % -5.39 -4.39 -1.21 -0.59 15.48 12.55
Hormel (NYSE:HRL) 45.17 49.96 0.200 1.60 37 % 32 % 10.60 11.93 -3.52 12.67 17.65 22.11
Kellogg (NYSE:K) 61.07 64.30 0.460 2.86 47 % 45 % 5.29 6.80 -3.22 -3.44 4.55 7.06
Kimberly-Clark (NYSE:KMB) 104.46 108.77 0.840 3.09 55 % 51 % 4.13 6.54 -0.66 5.23 3.70 8.00
Lancaster (NASDAQ:LANC) 88.15 88.09 0.440 2.00 45 % 42 % -0.07 0.93 -2.99 15.85 10.00 10.88
McCormick (NYSE:MKC) 68.92 69.07 0.370 2.14 45 % 42 % 0.22 1.83 -4.93 0.70 8.82 10.83
Pepsi (NYSE:PEP) 82.94 91.60 0.655 2.86 57 % 53 % 10.44 12.02 -2.55 7.21 15.42 9.11
Procter&Gamble (NYSE:PG) 81.41 83.39 0.642 3.08 61 % 58 % 2.43 4.80 -1.63 0.22 6.64 9.20
JM Smucker (NYSE:SJM) 103.62 101.36 0.580 2.29 41 % 38 % -2.18 -1.06 -2.59 -2.64 11.54 13.14

Average         2.56 49 % 45 % 2.15 3.79 -3.59 2.98 8.71 12.93

The SPY [S&P 500 EFT] is up 7.85% year to date. - and with unreinvested dividends is up 8.81% year to date.
The KXI [Consumer Staples ETF] is up 3.35% year to date - and with unreinvested dividends is up 4.71%.
With the 10 Treasury at 2.39% and the sector average yield [on Q2 Divs] at 2.56% - the spread is 17 basis points.
* The change in the dividend is for the last twelve months and not year to date.

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Year to date news on under performing stocks:
SJM's Jiff has long term contracts for supply, and is not benefiting from the price fall in peanuts. HRL's Skippy does not have long term contracts - and it is benefiting from the price fall in peanuts. In its mid February conference call, Smucker's cut its full-year adjusted earnings forecast to $5.55-$5.60 per share from $5.72-$5.82. On 6-05 SJM provided 2015 non-GAAP EPS guidance in the range of $5.95 to $6.05 - which was in line with the existing projections.
CAG's consumer segment posted a sales decrease of 3.5% to $1.87 billion on a 3% decline in volume. Some key brands like Healthy Choice, Orville Redenbacher's and Chef Boyardee continue to post "substantial" declines in volume. CAG lowered its EPS projection in February - and did so again on June 18th. CAG's results have been buoyed somewhat by the company's $4.95 billion acquisition of private-label food maker Ralcorp last year.
FLO provided guidance for 2014 of earnings per share of $0.98 to $1.05 compared to the existing analyst consensus projection of $1.05. Share price appreciation was 39.87% in 2013 compared to a sector average of 24.52% - and FLO ended 2013 with a 23.59 P/E compared to the coverage universe average of 19.87. FLO's normal premium has been just over 300 bps. It's my best guess that the 2014 under performance of FLO has more to do with mean revision that it has to do with any negative operating news.
CLX cuts its EPS forecast to $4.25-$4.35. CLX updated their fiscal year outlook to reflect a negative full-year impact of about 15 cents from the recent Venezuela currency devaluation. Dividend dates are:

ADM : 09-10-14 CPB: 08-03-14 KO : 09-30-14 CAG: 08-27-14 CL: 08-14-14
INGR : 07-24-14 CLX : 08-07-14 FLO: 06-18-14 GIS : 07-31-14 HSY: 09-14-14
HRL : 08-14-14 K : 09-14-14 KMB: 07-01-14 LANC: 06-29-14 MKC: 07-20-14
PEP: 09-29-14 PG: 08-14-14 SJM: 09-01-14 KXI: 06-20-14 SPY: 06-20-14
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Historical yields for the sector:

Mar 2010: 2.77% June: 2.92% Sept: 2.92% Dec: 2.78%
Mar 2011: 2.84% June: 2.76% Sept: 2.94% Dec: 2.81%
Mar 2012: 2.81% June: 2.82% Sept: 2.80% Dec: 2.81%
Mar 2013: 2.42% June: 2.47% Sept: 2.58% Dec: 2.48%
Mar 2014: 2.53% June: 2.54% Sept: Dec:
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The Importance of Rising Dividends year to date The following companies had dividend growth of more than 9% between Q2-13 and Q2-14: ADM , INGR , CLX , FLO , GIS , HSY , HRL , LANC , PEP , SJM . Their mean price gain for the year is 3.18%. Their mean total return for the year is 4.67% - and 5 of the 10 beat the sector median yearly price gain.
The following companies had dividend increases of less than or equal to 9% : CPB , KO , CAG , CL , K , KMB , MKC , PG . Their mean price gain for the year is 0.85%. Their mean total return for the year is 2.69% - and 3 of the 8 beat the sector median yearly price gain.

The Importance of the Dividends/EPS year to date The following companies have dividend/EPS ratios under 44%: ADM , INGR , HRL , SJM . Their mean price gain for the year is 8.93%. Their mean total return for the year is 10.27% - and 3 of the 4 beat the sector median yearly price gain.
The following companies have dividend/EPS ratios over 44% but under 52%: CPB , CAG , CL , FLO , HSY , K , LANC , MKC , PEP . Their mean price gain for the year is -0.55%. Their mean total return for the year is 0.91% - and 2 of the 9 beat the sector median yearly price gain.
The following companies had dividend/EPS ratios over 52% : KO , CLX , GIS , KMB , PG . Their mean price gain for the year is 1.58%. Their mean total return for the year is 3.78% - and 3 of the 5 beat the sector median yearly price gain.

The Importance of EPS Revisions year to date The following companies had growing EPS estimates since the beginning of 2014: CPB . Their mean price gain for the year is 1.69%. Their mean total return for the year is 3.85% - and 0 of the 1 beat the sector median yearly price gain.
The following companies had decreases - but decreases of less than 5% - to the EPS estimates: CL , INGR , CLX , GIS , HSY , HRL , K , KMB , LANC , MKC , PEP , PG , SJM . Their mean price gain for the year is 3.1%. Their mean total return for the year is 4.81% - and 7 of the 13 beat the sector median yearly price gain.
The following companies had decreases to the EPS estimates of more than 5% since the beginning of 2014: ADM , KO , CAG , FLO . Their mean price gain for the year is -0.85%. Their mean total return for the year is 0.45% - and 1 of the 4 beat the sector median yearly price gain.

The Importance of Rising Price Targets year to date This cynic believes that 'people have to be told to buy stocks - and which ones to buy'. One way this is done is via the changes in their price targets.
The following companies had rising price targets since the beginning of the year : ADM , CPB , KO , CL , INGR , FLO , GIS , HRL , KMB , LANC , MKC , PEP , PG . Their mean price gain for the year is 3.86%. Their mean total return for the year is 5.56% - and 7 of the 13 beat the sector median yearly price gain.
The following companies had flat or falling price targets : CAG , CLX , HSY , K , SJM . Their mean price gain for the year is -2.32%. Their mean total return for the year is -0.84% - and 1 of the 5 beat the sector median yearly price gain.

Price/Earnings Ratios 08-22
CAG, GIS, PG and SJM are already in fiscal 2015


  EPS / Share % EPS Growth Price/EPS 14 EPS Range
Co. 2011 2012 2013 2014 2015 11-12 12-13 13-14 14-15 2013 2014 2015 High Low Range

ADM 3.47 2.30 2.33 3.05 3.59 -33.72 1.30 30.90 17.70 21.09 16.11 13.69 3.40 2.90 16.39%
CPB 2.54 2.44 2.64 2.54 2.57 -3.94 8.20 -3.79 1.18 16.67 17.33 17.12 2.60 2.51 3.54%
KO 1.92 2.01 2.08 2.08 2.22 4.69 3.48 0.00 6.73 19.77 19.77 18.52 2.12 2.04 3.85%
CAG 1.75 1.84 2.16 2.17 2.39 5.14 17.39 0.46 10.14 14.75 14.68 13.33 2.35 2.21 6.45%
CL 2.52 2.68 2.84 2.96 3.27 6.35 5.97 4.23 10.47 22.74 21.81 19.75 3.05 2.96 3.04%
INGR 4.68 5.57 5.05 5.53 6.10 19.02 -9.34 9.50 10.31 15.46 14.12 12.80 5.76 5.45 5.61%
CLX 3.93 4.10 4.31 4.42 4.72 4.33 5.12 2.55 6.79 20.70 20.18 18.90 4.38 4.26 2.71%
FLO 0.64 0.69 0.91 0.95 1.10 7.81 31.88 4.40 15.79 21.08 20.19 17.44 1.05 0.98 7.37%
GIS 2.48 2.56 2.69 2.82 3.01 3.23 5.08 4.83 6.74 19.59 18.69 17.51 3.15 2.96 6.74%
HSY 2.82 3.24 3.72 4.07 4.48 14.89 14.81 9.41 10.07 24.73 22.60 20.53 4.15 4.05 2.46%
HRL 1.74 1.86 1.97 2.19 2.52 6.90 5.91 11.17 15.07 25.36 22.81 19.83 2.24 2.17 3.20%
K 3.38 3.61 3.77 3.91 4.13 6.80 4.43 3.71 5.63 17.06 16.45 15.57 4.25 3.84 10.49%
KMB 4.80 5.25 5.77 6.06 6.53 9.38 9.90 5.03 7.76 18.85 17.95 16.66 6.20 6.05 2.48%
LANC 3.84 3.45 3.98 3.90 4.17 -10.16 15.36 -2.01 6.92 22.13 22.59 21.12 3.99 3.85 3.59%
MKC 2.79 3.04 3.13 3.28 3.56 8.96 2.96 4.79 8.54 22.07 21.06 19.40 3.30 3.25 1.52%
PEP 4.40 4.10 4.37 4.59 4.96 -6.82 6.59 5.03 8.06 20.96 19.96 18.47 4.60 4.50 2.18%
PG 3.95 3.85 4.05 4.22 4.46 -2.53 5.19 4.20 5.69 20.59 19.76 18.70 4.28 4.16 2.84%
SJM 4.81 4.73 5.37 5.64 6.03 -1.66 13.53 5.03 6.91 18.88 17.97 16.81 6.14 5.88 4.61%

Average           8.21 5.52 8.92 20.14 19.11 17.56      

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Yield + CAGR Total Return Expectations


Company Q2-14 My Total Bonds Acc My Total Rtn Consensus Pr Impl Div
    Yield CAGR Return Rate Rate RRRs - RRR Ratings CAGR / EPS

ArchDanMidlnd ADM 1.95% 9.00% 10.95% A 5.0 11.20 -0.25 2.5 9.25 31.48
Campbell CPB 2.84% 4.50% 7.34% A 1.0 9.80 -2.46 3.1 6.96 49.21
Coke KO 2.97% 5.50% 8.47% A+ 2.0 10.10 -1.63 2.2 7.13 58.65
ConAgra CAG 3.14% 7.00% 10.14% BBB- 1.3 10.80 -0.66 2.3 7.66 46.08
Colgate CL 2.23% 7.30% 9.53% AA- 1.5 9.80 -0.27 2.7 7.57 48.65
Ingredion INGR 2.15% 9.10% 11.25% none 2.0 10.80 0.45 2.3 8.65 30.38
Clorox CLX 3.18% 5.00% 8.18% BB 1.5 10.30 -2.12 3.0 7.12 64.25
Flowers FLO 2.50% 8.50% 11.00% none 4.0 10.70 0.30 2.0 8.20 50.53
General Mills GIS 3.11% 6.50% 9.61% BBB+ 1.0 10.30 -0.69 2.8 7.19 58.16
Hershey HSY 2.11% 9.40% 11.51% A 1.0 10.30 1.21 2.4 8.19 47.67
Hormel HRL 1.60% 9.70% 11.30% A 1.0 10.30 1.00 2.4 8.70 36.53
Kellogg K 2.86% 6.00% 8.86% BBB+ 1.7 10.30 -1.44 3.0 7.44 47.06
Kimberly-Clark KMB 3.09% 7.50% 10.59% BBB- 1.8 10.30 0.29 3.1 7.21 55.45
Lancaster LANC 2.00% 5.00% 7.00% A 2.0 10.30 -3.30 3.0 8.30 45.13
McCormick MKC 2.14% 7.00% 9.14% none 2.5 10.30 -1.16 2.9 8.16 45.12
Pepsi PEP 2.86% 5.80% 8.66% A- 2.2 9.90 -1.24 2.2 7.04 57.08
Procter&Gamble PG 3.08% 5.20% 8.28% A- 2.0 10.00 -1.72 2.2 6.92 60.90
JM Smucker SJM 2.29% 7.00% 9.29% AA 2.0 9.80 -0.51 2.6 7.51 41.13

Average   2.56% 6.94% 9.51%         2.59

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Disclosure: The author is long CL, CLX, HRL, GIS, PEP, PG, SJM.