Hormel Foods: Great Choice For Dividend Investors But Risks Ahead

Feb. 20, 2020 11:16 AM ETHormel Foods Corporation (HRL)9 Comments
Daniel Dunaevski profile picture
Daniel Dunaevski


  • HRL is a dividend aristocrat with 53 years of dividend increases in succession.
  • Low organic growth and dependence on acquisitions to achieve growth targets.
  • Market leadership and strong brands, but still tough competition.
  • Very solid financial situation.
  • There is an overvaluation at the current price.

Stock Analysis: Hormel Foods Corporation

In my opinion, Hormel Foods Corporation (NYSE:HRL) is a company with a very secure business model with consistent cash flows, a superior market position and steadily increasing profits. Especially outstanding is the consistent dividend history with high growth rates. However, I see the low organic growth and the high number of acquisitions as problematic.

Cycle and business model

HRL operates in the consumer staples sector and therefore has a not very cyclical business model. This segment is characterized by relatively low operating growth, but operating cash flow and net income are stable and not subject to major fluctuations. For this reason, even in times of crisis, there have only been small periods of declining growth rates.

At the same time, HRL strives to further reduce its dependence on fluctuations and to reduce the risks. For this reason, important resources, such as pork, are hedged with the help of long-term contracts to secure the price over a longer period. Finally, HRL tries to concentrate on products with year-round demand in order to avoid seasonal fluctuations.

Overall, HRL is a very stable, non-cyclical and crisis-proof business model.


HRL operates mainly in the packaged food sector with a focus on meat products and a regional focus on the USA. According to a study by Statista, the market for meat products will grow by about 2.5% annually in the coming years until 2023. At the same time, the market for food products in the USA is expected to grow at an annual rate of 1.8% until 2023. These are the figures to follow when trying to predict the organic growth of HRL. It quickly becomes clear that it is a disadvantage in terms of growth that HRL is only active in the U.S. market, as the worldwide growth for packaged

This article was written by

Daniel Dunaevski profile picture
I analyse and evaluate companies. For 14 years I have been engaged in fundamental analysis and pursue a long-term strategy based on the value principle. Follow me in order to regularly receive new investment ideas for exciting, long-term superior and undervalued companies.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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