Hormel Foods Corporation (NYSE:HRL) is not exactly the first stock that comes to mind when investors talk about growth. It is a food company, after all, and most of its brands have been around for years. But that is also what makes Hormel interesting for income investors. The company owns a number of familiar brands, including SPAM, Skippy, Planters, Applegate, Jennie-O, and Hormel. Its products are sold through grocery stores, restaurants, and other foodservice channels, as well as in international markets.
One of Hormel’s biggest strengths is simply that people know its brands. Food is a crowded industry, but consumers don’t usually spend much time thinking about which brand of a familiar product to buy. That gives established names like Hormel an advantage. The company’s size also helps when it comes to sourcing ingredients, manufacturing, and getting products onto shelves.
Its Foodservice business has been one of the better parts of the story lately. In the latest quarter, the segment recorded its 12th straight quarter of organic sales growth, with organic sales up 2%. The overall picture is not quite as strong, though. Retail volume fell 9% in the third quarter, while International volume declined 11%. Total sales were down 2.4% to $2.96 billion.
Still, Hormel managed to increase adjusted EPS by 6% to $0.37. Better margins and lower selling, general, and administrative expenses helped offset some of the weakness in sales and volumes.
Hormel’s Dividend Still Has Cash Flow Behind It
For income investors, the dividend is probably the main reason to look at Hormel Foods Corporation in the first place. In September, the company declared a quarterly dividend of $0.2925 per share, which works out to $1.17 a year. Hormel has now paid 393 consecutive quarterly dividends and has increased its dividend for 60 straight years. This places the stock in the dividend aristocrats category. There are other options for investors to consider from this group.
At a share price of around $20, investors are getting a yield of about 5.9%. That’s a pretty hefty yield for a large consumer-staples company. Of course, the yield alone doesn’t tell us whether the dividend is safe. The more important question is how much cash the business is actually generating. So far this year, the numbers are encouraging.
Hormel generated $768.8 million in operating cash flow during the first nine months of fiscal 2026, compared with $522.3 million during the same period last year. It spent $219.3 million on capital expenditures, leaving around $549.4 million after those investments. Dividends accounted for $481.4 million of that cash during the period. That means the dividend took up about 88% of the cash left after capital spending. That’s certainly something to keep an eye on. There isn’t a massive cushion here.
At the same time, operating cash flow has improved quite a bit from last year, which gives the dividend some support. The payout ratio based on earnings is also fairly high. Hormel expects adjusted EPS of $1.45 to $1.51 for fiscal 2026. With a $1.17 annual dividend, that puts the adjusted payout ratio somewhere around 77% to 81%. That’s not a low payout ratio. But for a mature food company like Hormel, it is not necessarily a deal breaker either.
Hormel Stock Looks Reasonably Priced
The valuation is another reason the stock is worth a look. Hormel’s forward P/E sits at 12.85x. The trailing P/E is much higher at 32.13x, but that number is less useful right now because GAAP earnings have been affected by several unusual charges. The forward P/E gives us a better idea of what investors are paying for the earnings Hormel is expected to generate.
At 12.85x forward earnings, Hormel doesn’t look expensive. In fact, the implied earnings yield is about 7.8%. That’s higher than the roughly 5.9% dividend yield, which means the company is still retaining part of its earnings rather than handing all of them back to shareholders. The valuation also doesn’t require Hormel to deliver spectacular growth. Management expects adjusted EPS to grow 6% to 10% in fiscal 2026, even with some parts of the business dealing with weaker volumes.
That’s probably the right way to look at Hormel. This isn’t a company investors buy because they expect earnings to suddenly take off. The appeal is the combination of familiar brands, steady demand, a long dividend record, and a valuation that isn’t asking for much. There is another packaged foods company that is trading at an even lower multiple. Find out here.
The Bottom Line
Hormel Foods Corporation still has some work to do. Retail volumes are weak, the payout ratio is high, and the company is dealing with pressure in parts of its portfolio. However, the dividend doesn’t look completely disconnected from the underlying business. Cash flow has improved, Foodservice continues to perform well, and management still expects earnings to grow this year.
At around a 5.9% yield and 12.85x forward earnings, Hormel looks more interesting than its slow-growth reputation might suggest. The stock is not without risk, particularly with such a high payout ratio, but investors looking for income may find the current price worth considering.
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This article is originally published at Insider Monkey.
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