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McCormick (MKC) Rewards Investors With a Dividend Raise
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McCormick & Company, Incorporated (MKC - Free Report) is focused on boosting shareholders’ returns. The global leader in flavor announced a dividend hike. It will now pay a quarterly dividend of 39 cents per share, up from the prior rate of 37 cents. The hiked dividend will be paid out on Jan 9, 2023, to shareholders of record as of Dec 30, 2022. This marks the company’s 37th consecutive year of a quarterly dividend hike.
McCormick currently has a dividend payout of 56%, a dividend yield of 1.8% and a free cash flow yield of 3.8%. With an annual free cash flow return on investment of 5.3%, the increased dividend is likely to be sustainable. During the third quarter of fiscal 2022, McCormick returned $298 million in cash to shareholders through dividends. Dividend payouts are one of the biggest enticements for investors and McCormick is committed to spurring shareholders’ value.
What Else Should You Know?
The Zacks Rank #3 (Hold) company has strategically increased its presence through acquisitions, which have been strengthening its portfolio. In December 2020, McCormick bought a 100% stake in FONA International, LLC and some of its affiliates. FONA’s diverse portfolio helps McCormick bolster its value-add offerings and expand the flavor solutions segment into attractive categories. In November 2020, McCormick completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. The buyout of Cholula accelerates McCormick’s growth potential across the condiment platform and widens the product portfolio in the hot sauce category.
The company is on track to make investments to expand its infrastructure worldwide. In this regard, McCormick is investing in its supply chain to enhance capacity and capabilities. In its last earnings call, management highlighted that it is investing in additional Flavor Solutions seasoning capacity, which is likely to come online at the beginning of 2023.The company is expanding FONA's footprint to aid flavor growth. Recently, management opened its new U.K. Peterborough Flavor Solutions production unit to support solid growth momentum with quick-service restaurants.
Image Source: Zacks Investment Research
McCormick focuses on saving costs and enhancing productivity through the Comprehensive Continuous Improvement (“CCI”) program. Started in 2009, the CCI program helped the company reduce costs and improve productivity. It has used CCI savings to increase investments, leading to higher sales and profits. Management expects to achieve CCI-led cost savings of $85 million in 2022.
Wrapping Up
McCormick has been grappling with cost inflation for a while now. During third-quarter fiscal 2022, the company’s gross profit margin contracted 320 basis points (bps) to 35.5%, thanks to escalated cost inflation and other supply chain expenses. McCormick is bearing the brunt of supply chain bottlenecks as the recovery of some constrained materials is taking longer than anticipated. All said, the aforementioned cost-saving efforts and expansion efforts are likely to aid growth.
MKC’s stock has dropped 0.4% in the past three months against the industry’s growth of 4.8%.
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales suggests growth of 46.5% from the year-ago reported number, while earnings indicate significant growth.
General Mills, which manufactures and markets branded consumer foods, carries a Zacks Rank #2 (Buy) at present. General Mills has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for GIS’ current financial year sales and earnings suggests growth of 2.7% and 3.8%, respectively, from the year-ago reported numbers.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2. CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
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McCormick (MKC) Rewards Investors With a Dividend Raise
McCormick & Company, Incorporated (MKC - Free Report) is focused on boosting shareholders’ returns. The global leader in flavor announced a dividend hike. It will now pay a quarterly dividend of 39 cents per share, up from the prior rate of 37 cents. The hiked dividend will be paid out on Jan 9, 2023, to shareholders of record as of Dec 30, 2022. This marks the company’s 37th consecutive year of a quarterly dividend hike.
McCormick currently has a dividend payout of 56%, a dividend yield of 1.8% and a free cash flow yield of 3.8%. With an annual free cash flow return on investment of 5.3%, the increased dividend is likely to be sustainable. During the third quarter of fiscal 2022, McCormick returned $298 million in cash to shareholders through dividends. Dividend payouts are one of the biggest enticements for investors and McCormick is committed to spurring shareholders’ value.
What Else Should You Know?
The Zacks Rank #3 (Hold) company has strategically increased its presence through acquisitions, which have been strengthening its portfolio. In December 2020, McCormick bought a 100% stake in FONA International, LLC and some of its affiliates. FONA’s diverse portfolio helps McCormick bolster its value-add offerings and expand the flavor solutions segment into attractive categories. In November 2020, McCormick completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand. The buyout of Cholula accelerates McCormick’s growth potential across the condiment platform and widens the product portfolio in the hot sauce category.
The company is on track to make investments to expand its infrastructure worldwide. In this regard, McCormick is investing in its supply chain to enhance capacity and capabilities. In its last earnings call, management highlighted that it is investing in additional Flavor Solutions seasoning capacity, which is likely to come online at the beginning of 2023.The company is expanding FONA's footprint to aid flavor growth. Recently, management opened its new U.K. Peterborough Flavor Solutions production unit to support solid growth momentum with quick-service restaurants.
Image Source: Zacks Investment Research
McCormick focuses on saving costs and enhancing productivity through the Comprehensive Continuous Improvement (“CCI”) program. Started in 2009, the CCI program helped the company reduce costs and improve productivity. It has used CCI savings to increase investments, leading to higher sales and profits. Management expects to achieve CCI-led cost savings of $85 million in 2022.
Wrapping Up
McCormick has been grappling with cost inflation for a while now. During third-quarter fiscal 2022, the company’s gross profit margin contracted 320 basis points (bps) to 35.5%, thanks to escalated cost inflation and other supply chain expenses. McCormick is bearing the brunt of supply chain bottlenecks as the recovery of some constrained materials is taking longer than anticipated. All said, the aforementioned cost-saving efforts and expansion efforts are likely to aid growth.
MKC’s stock has dropped 0.4% in the past three months against the industry’s growth of 4.8%.
3 Solid Staple Picks
Some top-ranked stocks are The Chef's Warehouse (CHEF - Free Report) , General Mills (GIS - Free Report) and Conagra Brands (CAG - Free Report) .
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales suggests growth of 46.5% from the year-ago reported number, while earnings indicate significant growth.
General Mills, which manufactures and markets branded consumer foods, carries a Zacks Rank #2 (Buy) at present. General Mills has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for GIS’ current financial year sales and earnings suggests growth of 2.7% and 3.8%, respectively, from the year-ago reported numbers.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2. CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.