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Hershey: Sweet Buy With An Even Sweeter Yield

May 04, 2018 1:56 PM ETThe Hershey Company (HSY)20 Comments
Yanni Lodato profile picture
Yanni Lodato


  • From both an investment and business standpoint, confectionery giant The Hershey Company offers great investment appeal.
  • Hershey displays a number of competitive advantages.
  • Hershey is moderately valued, eliciting a buy recommendation.

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Source: Google Images "The Hershey Company"

The Hershey Company (NYSE:HSY) displays strong investment appeal as a result of the company's formidable business characteristics and strong capital appreciation/dividend performance. HSY displays a sizable 2.87% dividend yield and has sustained consistent dividend growth for the past 8 years. HSY's positioning in the confectionary industry makes the stock inherently defensive as consumer staples experience steady demand in spite of vagaries in the economic cycle. Overall, HSY's defensive characteristics, business health, strong growth prospects, and investment appeal make the stock a portfolio essential.

Why Buy the Hershey Company

Business Strengths: From an overall business standpoint, HSY displays formidable business advantages. The company has prominent brands, capable management, and intrinsic business advantages. HSY is one of the most widely recognized candy manufacturers. In the United States, HSY is the largest player in the confectionery market, assuming 31.1% of U.S confectionery market share. The only competitors that come close to HSY's market share are Mars at 28.9%, Mondelez at 5.1%, Lindt/Ghirardelli 5.2%, and Nestle at 4.3%. HSY's enormous business size enables the company to fully capitalize on economies of scale through extensive mechanization, large material buying, and sizable capital deployments. Such business qualities help HSY precipitate healthy bottom line figures (gross margin of 46% and profit margin of 11%). HSY also offers some of the most prominent candy brands ranging from Reese's, Hershey Bars, Kit Kat, Almond Joy, Hershey Kisses, Twizzlers, and Jolly Ranchers.

Source: Google Images

In addition to HSY's candy segment, the company is also involved in gum and mint products (ex. Ice Breakers, Breathsavers, and Bubble Yum), pantry and snack items (baking products, toppings, syrups, chocolate spreads), high end chocolates (Scharffen Berger, Dagoba brands), and beef jerky snack products (Krave). HSY's diversification across various segments offers broadened customer appeal, assuring a candy or snack option for various taste preferences. HSY (although deriving 88% of revenues from the North American market) is involved

ChartHSY Dividend Yield (TTM) data by YCharts
ChartHSY Revenue (Annual) data by YCharts

ChartHSY Price to Book Value data by YCharts

This article was written by

Yanni Lodato profile picture
Oracle Investment Research helps individual investors find high-quality stocks with strong competitive advantages suitable for long-term holding. We cover dividend stocks, us stocks, and high growth advantageous risk reward stock opportunities ----------------------------------------------------------------------

Analyst’s Disclosure: I am/we are long HSY. 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.

Data is for illustrative purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are not tailored to individual portfolio needs or investment objectives. The presentation of a given security is based on my own model portfolio, which is presented solely for educational purposes. Yanni Lodato is an individual investor and author, not an investment adviser. Readers should always engage in further research and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or qualified attorney before making any investment decisions.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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