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Create a Dividend Machine With This DRIP Stock

Create a Dividend Machine With This DRIP Stock
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Friday, 07 September 2018 02:25 PM Current | Bio | Archive

DRIP stands for Dividend Reinvestment Plan. When an investor is enrolled in a DRIP plan, dividends received are automatically reinvested back into buying more shares. Many DRIP plans require fees, but fortunately many companies offer no-fee DRIPs.

Reinvesting dividends unleashes the power of compounding interest. By using dividends to buy more shares, investors create a steadily rising stream of dividend income over time.

The Dividend Aristocrats—a group of stocks in the S&P 500 Index with 25+ consecutive years of dividend increases—are a great place to look for DRIP stocks.

Hormel Foods Corp. (HRL) offers a no-fee DRIP, and the company has increased its dividend for 52 years in a row, which makes it an attractive stock for dividend growth investors.

Serving Up Growth and Dividends

Hormel is a food manufacturer. It has a diverse product portfolio, including non-perishable and refrigerated foods. Some of its major brands include Skippy, Jennie-O, Spam, Hormel, and Dinty Moore, among others. Hormel has also invested heavily to expand in new categories, such as natural and organic foods. In 2015, Hormel acquired Applegate Farms for $775 million. Applegate produces natural and organic prepared meats, such as deli meat, bacon, and hot dogs. It is the number one brand in natural and organic meats.

More recently, Hormel has made a few bolt-on acquisitions like the acquisition of Fontanini Italian Meats and Sausages, to expand its refrigerated foods. Hormel also acquired Ceratti, a branded meats business in Brazil. Over the past year it also acquired Columbus Manufacturing, a premium deli meat and salami manufacturer. These acquisitions will help boost Hormel’s growth in new areas, as well as expand further in existing product lines.

Hormel has an impressive history of growth. The company delivered annual earnings growth of 11% over the past 10 years. Hormel demonstrated its operational strength in the most recent quarter. Sales increased 7%, due to 10% growth in the Refrigerated Foods segment. Hormel grew earnings-per-share by 15% from the same quarter last year.

For 2018, Hormel expects sales of $9.4 to $9.6 billion. Earnings-per-share are expected in a range of $1.81 to $1.95 for the year. At the midpoint of guidance, earnings are expected to increase 20% from the previous year. A high rate of earnings growth has allowed the company to increase its dividend for so many years.

Hormel stock has a current dividend yield of just 1.8%, which is a relatively low yield. However, shareholder dividends will grow rapidly over time, due to the company’s double-digit dividend increases. In the past 10 years, Hormel has increased its dividend by 15% per year. Hormel has a highly profitable business model and a portfolio of strong brands. Its high growth potential makes Hormel stock an attractive pick for dividend growth investors.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.
 

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BenReynolds
DRIP stands for Dividend Reinvestment Plan. When an investor is enrolled in a DRIP plan, dividends received are automatically reinvested back into buying more shares. Many DRIP plans require fees, but fortunately many companies offer no-fee DRIPs.
dividend, machine, drip, stock
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2018-25-07
Friday, 07 September 2018 02:25 PM
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