J M Smucker Co (SJM) Dividend Stock Analysis

One factor to look at is that sales to Wal-Mart Stores, Inc. (NYSE:WMT) account for over a quarter of sales. This is high reliance on the worlds largest retailer, which is known for its stance to keep costs low. On the other hand, this is a mutually beneficial relationship, as customers looking for a particular brand may be turned off a retailer if they do not find it.

The annual dividend payment has increased by 10.20% per year over the past decade, which higher than the growth in EPS. This was achieved mainly through the expansion in the dividend payout ratio.

A 10% growth in distributions translates into the dividend payment doubling almost every seven years. If we look at historical data, going as far back as 1997 we see that J M Smucker Co (NYSE:SJM) has actually managed to double its dividend every seven and a half years on average.

The dividend payout ratio has increased from 39.10% in 2007 to 46% in 2016. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

The return on equity has remained steady between 8% – 10%, with some rare exceptions driven by one-time items. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

Currently, J M Smucker Co (NYSE:SJM) is attractively valued at 16.80-times forward earnings and yielding 2.30%. I recently initiated a small position in J.M Smucker. I would consider adding to my position in the stock on dips below $120/share.

Full Disclosure: Long PG and SJM