ConAgra New Senior Debt Yields 3.29%

| About: ConAgra Brands, (CAG)

On September 11, 2012 ConAgra (NYSE:CAG) issued $250M in senior 10-yr bonds. The company also issued $500M in near-term bonds due in 2015 and 2018.

credit rating price yield
Conagra Foods Inc Sr Nt 3.25% 9/15/2022, Make Whole Call (cusip: 205887BJ0) sinking fund protection, not call protected Baa2/BBB $99.60 3.29%

These bonds have been trading between 3.308% and 3.35% yield. ConAgra also has 9/15/2030 bonds on the market that yield 5.21%.

credit rating price yield
Conagra Foods Inc Nt 8.25% 9/15/2030 (cusip: 205887AX0) sinking fund protection, not call protected Baa2/BBB $135.20 5.21%

Moody's currently holds a stable outlook on ConAgra. The company's fiscal 2012 annual report shows:

2012 2011 2010 2009 2008
Senior long-term debt (noncurrent) $2.6B $2.6B $3B $3.2B $3.1B
Subordinate long-term debt (noncurrent) $195M $195M $195M $195M $200M

These figures do not include the new $750M in debt issued. In order to size up ConAgra's new debt, here are a couple of bonds from competing food companies, Kellogg (NYSE:K), Smuckers (NYSE:SJM) and Wal-Mart (NYSE:WMT):

credit rating price yield
Kellogg Co Sr Nt 3.125% 5/17/2022 (cusip: 487836BJ6) Baa1/BBB+ $103.01 2.76%
Smucker J M Co Sr Nt 3.5% 10/15/2021 (cusip: 832696AB4) sinking fund protection, not call protected A3/BBB+ $109.56 2.32%
Wal-Mart Stores Inc Deb 6.75% 10/15/2023 (cusip: 931142AU7) sinking fund protection, call protected Aa2/AA $135.66 2.95%

Investors could consider diversifying into two bond positions instead of just one. In this instance, the ConAgra bonds have a better yield than Kellogg, Smucker and Wal-Mart. However, these companies have better credit ratings than ConAgra.

To put this in perspective, you could compare these bonds to higher yield Ford Motor Credit Co. LLC bonds. However, realize Ford's credit rating is just one notch above junk. Therefore, a strategist might consider one lot of ConAgra bonds, one lot of Wal-Mart bonds (for quality) and one lot of Ford bonds (for yield.)

credit rating price yield
Ford Motor Credit Co LLC Nt 5.75% 02/01/2021 (cusip: 345397VR1) sinking fund protection, call protected Baa3/BB+ $111.61 4.09%

As a result of the QE3 announcement yesterday, the stock market has soared. As the stock market goes up, bond prices are falling. It is very important to consider allocation size, market direction and use of income. Consider IRA versus non IRA tax implications and the rate of inflation.

If an investor holds these bonds in an IRA and uses the fixed income to go into inflation protected funds and favored stocks, the overall yield should be greater. Of course, this depends on performance. However, an investor who holds bonds in a non IRA and has no plans to designate income would likely not see the same returns, due to taxes and inflation.

Like any investment, bonds carry risk, including the risk of default. Individuals should consult a financial advisor to determine what size allocation, if any, would meet your financial objectives. This article is not a recommendation to buy. If you have any thoughts regarding ConAgra Corp. bonds, please comment below.

Disclosure: I am long CAG, F, KR, WMT, and I am considering long investments in ConAgra, Ford Mtr Credit Co. and Wal-Mart Corp. bonds. 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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