New launches in fiscal 4Q15
During fiscal 4Q15, Tyson Foods (TSN) launched the national expansion of Hillshire Snacking. During the fiscal third quarter earnings call, management mentioned that the expansion is very important to the company’s portfolio. It will contribute to category growth by driving new consumers into the Snacking segment. The second major launch in fiscal 4Q15 is shifting Ball Park, the hot dog brand, into the jerky category with a point of difference. In the fiscal 3Q15 earnings call, management mentioned that the new launches will likely moderate the retail margins a little in the fourth quarter.
Tyson Foods has a dividend yield of 0.85% as of November 18, 2015. The company’s management has been raising the dividend consistently for the last five years. It rose at an average annual rate of 11.5%. The company paid $0.3 per share in dividends to shareholders in the first three quarters of fiscal 2015. For fiscal 2015, the company plans to give a total of $0.4 per share to shareholders in the form of dividends. This implies another $0.1 per share in dividends in fiscal 4Q15. The company declared this in a press release on July 30. The dividend is payable on December 15, 2015, to shareholders of record at the close of business on December 1, 2015.
Capital allocation decisions
In the fiscal third quarter earnings call, management mentioned that the company’s capital allocation decisions are administered by its disciplined focus on driving long-term shareholder value. The company organizes significant cash flows from its operations by growing the business through organic growth and operationally efficient capital projects with attractive returns. The company also acquires businesses that support its strategic growth objectives. It returns cash to shareholders through share repurchases and dividends while maintaining liquidity and investment-grade ratings. The company shifted slightly from its priority of using discretionary cash flow towards debt reduction soon after the Hillshire acquisition. It paid down more than $1.6 billion in debt since the acquisition.
Its peers in the industry include General Mills (GIS), Kellogg (K), and McCormick (MKC). They reported returns of 6.8%, 1.0%, and 13.7%, respectively, as of November 18. The Power Shares S&P 500 High-Quality Portfolio (SPHQ) invests 1.3% of its portfolio in McCormick stock.