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Hormel Foods Is An Ideal Dividend Aristocrat For Troubled Times

Oct. 02, 2021 7:00 AM ETHormel Foods Corporation (HRL)47 Comments


  • So far, Hormel's impressive growth over time was in the U.S. But global expansion has management optimistic that it can drive steady growth for decades more.
  • Hormel's five-year consensus total return potential is 5%-11% CAGR.
  • Hormel Foods is a potentially ideal choice for conservative income investors who want to sleep well at night no matter what the economy does.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Learn More »
Skippy Recalls Batches Of Peanut Butter After Metal Shavings Are Detected

Justin Sullivan/Getty Images News

This article was coproduced with Dividend Sensei.

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This article was written by

Brad Thomas profile picture

Brad Thomas has over 30 years of real estate investing experience and has acquired, developed, or brokered over $1B in commercial real estate transactions. He has been featured in Barron's, Bloomberg, Fox Business, and many other media outlets. He's the author of four books, including the latest, REITs For Dummies.

Brad, with his team of 10 analysts, runs the investing group iREIT® on Alpha, which covers REITs, BDCs, MLPs, Preferreds, and other income-oriented alternatives. The team of analysts has a combined 100+ years of experience and includes a former hedge fund manager, due diligence officer, portfolio manager, PhD, military veteran, and advisor to a former U.S. President. Learn more

Analyst’s Disclosure: I/we have a beneficial long position in the shares of HRL either through stock ownership, options, or other derivatives. 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.

Author's Note: Brad Thomas is a Wall Street writer, which means he's not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: written and distributed only to assist in research while providing a forum for second-level thinking.

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 (46)

Stock is down 15% over the past 52 weeks. Near a 52-week low. Seems like a great time to buy considering the market is at all-time highs and 30% overvalued.
Et20 profile picture
Seems like a good stock pick with empty shelf joe and supply chain issues.
People need to eat and hrl is there to supply the food and moving into international market. I sleep well at night
Great analysis. If bought with the right margin of safety this is a stock whose holding period is forever
Love spam as do a lot of people I associate with. Hawaii must be on to something. I sleep well at night with this company
My father fought in the Second World War. Two things he would not allow in the house. Creamed chipped beef and spam. Btw love applegate. Didn’t know they were hormel.
Brad Thomas profile picture
@boog3 I love creamed chipped beef ;)
m8 profile picture
Broke $49 in Nov 2020 and hasn't been back above it since. Just a slow grind down to $40 where it has settled in. The 2020 open was $46.70 and that held it a couple of times but no real upside moves to hang a hat on. Very average - range bound and maybe mid 30's in their future by Xmas. Better places to put your hard earned money.
Brad Thomas profile picture
@m8 I spread my hard earned money around, just I do with Skippy ;)
Thanks Brad, Picked up some this a.m.
GratefulGuy57 profile picture
How does management continue to grow sales of SPAM? That makes them miracle workers in my book. Analysis is sound but there isn't a single brand there that my family uses. It's not a reason not to invest but it certainly gives me pause.
Brad Thomas profile picture
@GratefulGuy57 Thanks for reading & commenting....

Full disclosure: I don't eat SPAM
@Brad Thomas I've had mixed feelings about Spam after eating a lot of it waaay back in the 1960's and 1970's. I had Spam musubi in Hawaii about 20 years ago and wow I really liked it. That opened the door to trying fried Spam again and darn if I didn't find I loved that. Oddly, I enjoy it more than bacon!

Turned out my wife was family friends with Julius Zillgitt who was instrumental in the development of Spam. What a character he was and it has led to me having some peculiar fondness for Spam.
Yields4Travel profile picture
@GratefulGuy57 Spam is growing because of the pandemic and loss of income.
Please open & read the link below...Long HRL 25 years.

Here2Learn&Earn profile picture
I'm in if price drops to $25, allowing for some margin of safety. Drop the price for me and I'll take the risk.
Brad Thomas profile picture
@Here2Learn&Earn Thanks for reading and all the best
PE of 26. Like the whole market it is overvalued.
Brad Thomas profile picture
@erlichi Not in REIT-dom.... Come check out iREIT on Alpha !!
Peter Jaworowski profile picture
Thanks for the nice article. I agree this is when people want to be buying HRL. I’ve been a shareholder from the low $30’s years ago, the stock price climbed into the $50’s (which was a little too high) and now it’s certainly a buy.

Hormel is dealing with the same situation all consumer products companies are at the moment. Costs have gone up too quickly and there is a lag between the costs going up and the companies raising prices. This is a correctable situation, but you have to make the investment BEFORE all these companies start announcing better results from their newly implemented higher prices.

Keep in mind that the Hormel Foundation owns 48% of Hormel, which allows for a long term focus. Planters was a big acquisition and it’ll take a few years to get the balance sheet back to where it was, but Hormel will.
How many other companies are there that usually operate with more cash than debt? Not many.
@Peter Jaworowski It's the balance sheet strength that most investors miss when assessing HRL and concluding it is overpriced. I just bought in and will add to my position if it breaks below 40.
Why is the quant and momentum bearish?
Dividend Pro profile picture
Does HRL violate the Chowder Rule? That is very important.

It is at fair value at best according to FAST Graphs and other sources. No bargain.
No need to jump in yet for those looking.

And like your Guru Focus table clearly shows in Big Bold Red, all current metrics for HRL are worse than historically. You forgot to mention that little point. That is likely contributing to the price slide this year.

I like fried spam when I visit Hawaii ( largest Spam consumers), and like the company. But not a buyer here.

This article reads a bit like a pump, as negatives were not properly covered (as others have pointed out also). I expect better from you Brad! You are better than this.

BTW: They may be #2 in peanut butter, but other than #1 Kraft, nobody else counts in that race.
TraderJoeZ profile picture
@Dividend Pro Kraft peanut butter in the US is Planters, which Hormel now owns.
Peter Jaworowski profile picture
@Dividend Pro it’s not Kraft for #1 in peanut butter, it’s SJM with JiF.
Dividend Pro profile picture
@Peter Jaworowski

Oops. My bad. Should have said Jif (not Kraft in USA ).

I do prefer Kraft peanut butter, so that was on my mind since I am in Canada. In Canada, Kraft seems very dominant.

But in the USA, Jif owns more than 1/3 of the US market. All others trail far behind. Not the same in other countries.
craftbrewinfo profile picture
p/e still up there , but the yield is highest I have seen in years ..
SenorPablo profile picture
If the HRL chart is not an A-1 example of a falling knife, what is?
Higher 4 Longer profile picture
Timely article and great read. I just purchased some HRL this week.
craftbrewinfo profile picture
@Gordon Gekko Greed your screen name is awesome lol !!
"Over 20 years, tens of millions of investors have determined that a price-to-earnings ratio between 19 and 23.5 is approximate fair value for HRL."

What is the source of the alleged "tens of millions of investors" statistic?

Data underlying historic P/E ratio calculations involve trade pricing and corporate earnings, not number of distinct investors trading a particular security over time.
@Nescience How many investors do you think there are?
The ones that didn't buy it made as much of a decision as those who sold and those who did not buy.
Thanks for the article. Seems like a solid company but its Fastgraphs chart looks abysmally overpriced. Chuck C might say “wait for better valuation”?
@witrakw ironic isn’t it? The stock is down ~20% from its 52 week high, yet is still substantially overvalued.
ferjen profile picture
@StevedoreD Hmmm...based on it's 16 year chart, it's on sale bigly. Look at that juicy Average CAGR over 16 years.


And over 30 years, it's still looking like a buy, with an awesome Average CAGR near 14%:


I'll take 14% all day long. And their dividend yield is near the highest it's ever been in 30 years:

ChuckXX profile picture
HRL---Hmmmm lets see now. 1 Year Return is --10.7%, 3 Year Annualized Return is 3.51%, 5 Year Annualized Return is 3.46%. Divie is pretty small by my standards at 2.33%. I say Thanks but No Thanks. Better places to put my hard earned money.
@ChuckXX Oops, you neglected to mention a single one. Oh, well…
ChuckXX profile picture
@gregwardson Iam not understanding your comment. But if you want to buy HRL feel free to do so. I just don't see where it looks all that good to me. In the last 5 years you would have made 3.46% of your hard earned money. There are tons of places over the last 5 years that would have beaten that return hands down. During the height of the pandemic I was buying lots of high quality preferreds that were being shot. Now they are all trading way over par.
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