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J. M. Smucker: Show Me Growth Or Give Me Buybacks

Mar. 05, 2021 12:35 PM ETThe J. M. Smucker Company (SJM)12 Comments
Passive Income Pursuit profile picture
Passive Income Pursuit


  • J. M. Smucker Company is a Dividend Contender with 23 consecutive years of dividend growth. Shares currently yield 3.10%.
  • J. M. Smucker is a defensive consumer staple.
  • Analyzing J. M. Smucker through its cash flow and balance sheet and valuing the business through multiple angles.

JM Smucker Brands

Image source

J. M. Smucker (NYSE:SJM) is a well-known consumer staples business with several well-known brands outside of its namesake including JIF, Folgers, Meow Mix and many others. While the business has been steady, the share price has severely underperformed the S&P 500. Over the last five years, Smucker's share price is down 8.9% compared to the S&P 500's 88.0% rise. The stagnant share price while the business has continued to post modest results has led to an arguably cheap share price.

Dividend History

The dividend growth strategy is the one that appealed most to me when I began investing into individual companies. The concept is simple which is to focus on businesses that have a history of paying and growing their dividend payout as a means to harvest the fruit while keeping the tree.

JM Smucker Dividend History

Image by author; data source J. M. Smucker Investor Relations

Smucker is a Dividend Contender with 23 consecutive years of dividend growth. Its consecutive year streak dates back to 1997 which is quite impressive considering the numerous economic environments that have occurred over that time.

During its streak, there have s been 23 year-over-year periods with annual dividend growth ranging from 1.6% to 41.0% with an average of 10.4% and a median of 8.2%.

There have been 19 rolling 5-year periods during Smucker's streak with annualized dividend growth ranging from 6.3% to 13.1% with an average of 9.8% and a median of 10.4%.

Over that same period, there have been 14 rolling 10-year periods with annualized dividend growth ranging from 8.6% to 11.7% with an average of 9.8% and a median of 9.6%.

The rolling 1-, 3-, 5- and 10-year annualized dividend growth rates since 1997 can be found in the following table.

Year Annual Dividend 1 Year DGR 3 Year DGR

This article was written by

Passive Income Pursuit profile picture
I started a dividend growth investment strategy a few years ago and am aggressively growing my portfolio to churn out enough dividends to reach financial independence.

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

I am not a financial professional. Please consult an investment advisor and do your own due diligence prior to investing. Investing involves risks. All thoughts/ideas presented in this article are the opinions of the author and should not be taken as investment advice.

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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Comments (12)

If it was to get down to $8/share, I would be loading up on it.
Pay off debt then raise the dividend. No janking "per share" earnings with buybacks.
@firsTraveler 1000% in agreement.
Excellent. Thanks. The volatile share price has been frustrating for my fortunately small, experimental, position, of 100 shares held for several years. Usually I'm in the r.ed, as much as $10 or more per share; flat price very briefly not long ago; a few dollars down now. The revenue boost to staples from the pandemic cannot be relied on to last. I'm a skeptic on the likelihood of reliable growth for SJM. This buyback proposal makes sense.
Enjoyed your article particularly your focus on cash flows - me too.

The question for me is what is SJM doing with the net cashflow after dividends. Based on your chart it is not being used for buybacks recently which is fine with me. It must be going to new business opportunities like pet food, dividend increases or to debt payback.

Since management run their businesses a whole lot better than me all I can offer is my reaction as a buy and hold investor to what they are doing.

If investors were impressed with the investment in new businesses I would expect to see a growing PE - it is falling. Clearly dividend raises have been shrinking which does not impress DG investors like me. The move to pet foods appears to be more defensive or an act of desperation than part of a long range strategic growth plan. The sale of things like baking businesses is OK but not doing much to excite investors.

It would be good to hear SJM management articulate a clearer future. A primary focus on growing the dividend would be my preference. It would not stimulate more interest from growth investors but scratches my itch.

Thanks again.
Matthew Crews profile picture
I have done the reverse DCF myself, which lines up very close to yours except treatment of terminal growth and length of the growth stage. I model 13 years of growth then a terminal value of 1% inflation. Regardless, I'm curious as to how you are interpreting the required return based on that because that to me is the baseline to work off of for your other MARR or dividend yield theory work and any hurdle rate requirements.

The challenge I have is dealing with the reinvestment of funds versus the return based purely on holding the equity for the measured duration. For instance a 7.1% IRR requires a reinvestment of funds over time that compound differently than the economic DCF model alone.

Thanks for the article, I enjoyed working through the thought process.
There is no stock price growth.
You may as well invest in a tax exempt municipal bond...
The returns are about the same...
@FunInvesting The dividend is around 3%, where would you find a muni paying that?
@rjallen249 After tax.
@firsTraveler Mini's are paying below 1%, how much tax are you paying that brings a >3% divi to be competitive with a muni? I am not following you here.
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