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McCormick (MKC) Hikes Dividend: What Else Should You Know?

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McCormick & Company, Incorporated (MKC - Free Report) is focused on enhancing shareholder returns. The company, which has been paying dividends every year since 1925, announced a dividend hike. Notably, this marks McCormick’s 35th consecutive year of dividend increase.

The company will now pay a quarterly dividend of 68 cents per share, up from the prior rate of 62 cents. The hiked dividend will be paid out on a split-adjusted basis of 34 cents per share that reflects the two-for-one stock split, which is effective from Dec 1, 2020. Notably, the dividend will be paid out on Jan 11, 2021 to shareholders of record as of Dec 31.

McCormick currently has a dividend payout of 43.6%, a dividend yield of 1.4% and free cash flow yield of 3.5%. With an annual free cash flow return on investment of 11.7%, ahead of the industry’s 9.9%; the increased dividend is likely to be sustainable. Dividend payouts are one of the biggest enticements for investors and McCormick is committed toward the same.

 

What Else Should You Know?

McCormick regularly enhances products through innovation to remain competitive and tap into evolving demand for new flavors, spices and herbs. Aided by a sturdy brand image, McCormick enjoys strong retail acceptance for its new products. Notably, new products launched at the beginning of 2020 like Frank's RedHot thick sauces, Stubb’s reduced sugar barbecue sauce and Old Bay hot sauce contributed to growth in third-quarter fiscal 2020.

Further, McCormick strengthened its spices and seasonings portfolio through prudent acquisitions.  Toward this end, the company’s acquisition of the food division of RB Foods (concluded in August 2017) is noteworthy. With iconic brands like Frank’s RedHot, French’s and Cattlemen’s, RB Foods is likely to continue being a profitable asset for McCormick’s flavor portfolio. These brands position the company in the leading U.S. condiments category and position it for international expansion.

Also, McCormick is focused on saving costs and enhancing productivity through its ongoing Comprehensive Continuous Improvement (“CCI”) program. Started in 2009, the CCI program reduced costs and enhanced productivity. Cost savings from CCI boosted gross margin, which expanded 70 basis points to 41.3% in the fiscal third quarter.

Apart from these, the company is benefitting from rising demand stemming from increased at-home consumption amid the coronavirus outbreak. In fact, burgeoning demand amid the pandemic bolstered the company’s fiscal third-quarter results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Performance in the quarter gained from consistent rise in at-home consumption trends, which favorably impacted the company’s consumer business.

Notably, shares of this Zacks Rank #3 (Hold) company have increased 7.9% year to date against the industry’s decline of 1.3%.

Some Solid Food Bets

Pilgrim’s Pride (PPC - Free Report) , with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Blue Apron Holdings (APRN - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 30.3%, on average.

The Hain Celestial (HAIN - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 24.6%, on average.

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