The board of The J. M. Smucker Company (SJM - Analyst Report) has approved a dividend hike of 11.5%, thereby maintaining the trend of rewarding its shareholders consistently. The new dividend of 58 cents, up from the previous quarterly dividend of 52 cents, will be paid on Sep 3, 2013 to shareholders of record as of Aug 16.
Smucker has been increasing its rate of quarterly and annual dividends consistently since 2008. In Jul 2012, the company had increased its quarterly dividend by 8.3% from 48 cents to 52 cents.
Apart from increasing dividends, Smucker has been repurchasing shares consistently. In Jan 2013, Smucker’s board again increased the share repurchase authorization by five million shares as it had done in 2012.
In 2013, Smucker increased the annual dividend by 9% and repurchased nearly 4% of the company’s shares. The company’s cash and cash equivalents were $256.4 million at the end of the fourth quarter of fiscal 2013.
Regular dividend payments and share buybacks reflect the company’s confidence in its fundamentals. The share buyback helps the company reduce outstanding share count, thereby increasing earnings per share and return on equity. Apart from bolstering shareholder value, this strategic move will also lift the relatively undervalued share price.
Overall, we are impressed with the company’s strong portfolio of brands, focus on innovation and promotional offerings. Moreover, strategic acquisitions have broadened Smucker’s presence across emerging markets and added popular brands to its portfolio. The company is cash rich and its effective utilization of cash spurs profitability.
Smucker is scheduled to report its fiscal first quarter 2014 earnings on Aug 9. Our proven model shows that Smucker is likely to beat earnings because it has the right combination of two key ingredients.
A stock needs to have both a positive earnings expected surprise prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 for an earnings beat. The combination of Smucker’s Zacks Rank #2 (Buy) and an ESP of +2.52% makes us very confident in looking for a positive earnings beat on Aug 9.
Other Stocks to Consider
Other consumer staples worth considering are B&G Foods, Inc (BGS - Snapshot Report), Flower Foods Inc. (FLO - Snapshot Report) and Campbell Soup Co (CPB - Analyst Report). While B&G and Flower Foods carry a Zacks Rank #1 (Strong Buy), Campbell holds a Zacks Rank #2.