Hormel Foods Corporation (HRL): It’s a Spammy, Spammy World

How did Hormel fare against these industrial peers in top and bottom line growth over the past five years?

HRL Revenue TTM data by YCharts

Hormel’s revenue growth is slow and steady, only beaten out by B&G’s, which gained considerable momentum in 2012. However, with a market cap of $1.5 billion, B&G is also much smaller than Hormel – and smaller companies generally have much more upside than mature ones.

HRL EPS Diluted TTM data by YCharts

Like its top line growth, Hormel’s bottom line growth has been as smooth as its creamy Skippy peanut butter. Hormel’s balance between consumer packaged products, such as Skippy, and its packaged meat products has also given Hormel an edge over factory farming giant Tyson, which is completely dependent on the price of meat.

Dividend Increases

Hormel’s quarterly dividend of 17 cents per share – a 1.83% yield at the time of this writing – is hardly impressive. In fact, it’s near the bottom of the barrel in terms of yield for its industry.

Source: Yahoo Finance

Hormel has consistently raised its dividend over the past ten years, but the problem is its unimpressive yield. I believe if Hormel’s stock price growth cools off, then its yield will become more attractive when compared to its price.

The Foolish Bottom Line

Although there are many macro concerns on the horizon – the payroll tax cut, the ominous sequester, and weakened discretionary spending – people still have to eat. In a weak economy, brands such as Spam and Skippy will still thrive. Strong demand for Spam in overseas markets, which constantly evolve the product, is making Spam an indispensable, integral part of culinary cultures worldwide.

Hormel’s business model is also durable. Based on past performance, consumers eat more of its turkey products when times are good, and more Spam when times aren’t – a win-win, self-balancing situation for the company. Although Hormel’s brands are boring and slow growth, they are in constant, steady demand – perhaps just what investors need in today’s tumultuous economic environment.

The article It’s a Spammy, Spammy World originally appeared on Fool.com and is written by Leo Sun.

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