Hormel Foods’ Capital Allocation Plans



Stock buyback plans

Hormel Foods (HRL) has an extensive stock repurchase plan in place, in addition to paying dividends. Stock repurchases enhance its EPS by lowering its average share count. In the first half of fiscal 2018, the company repurchased $45 million in stock.

In comparison, Tyson Foods (TSN) has stated that it expects to recommence stock repurchases once its leverage is close to its net debt-to-EBITDA target of 2x. Pilgrims’ Pride (PPC) did not repurchase stock in the first quarter of fiscal 2018.

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On the other hand, Campbell’s (CPB) repurchased $75 million in stock in the first three quarters of fiscal 2018. However, the company has dropped stock buybacks due to its acquisition of Snyder-Lance. ConAgra (CAG) has also suspended its stock repurchase program, stating that it would buy back stock again if it is ahead of leverage targets.

Dividend policy

Hormel Foods is a dividend aristocrat, having hiked its dividend payout for the last 52 years. Coco-Cola (KO) and PepsiCo (PEP) are two other dividend aristocrats among S&P 500 packaged food companies.

On May 21, Hormel Foods announced a quarterly dividend of $0.1875 per share to be paid on August 15 to shareholders as of July 16. The company’s annualized dividend per share now stands at $0.75.

Peer comparison

Dividend yields represent the cash flow received by an investor for each dollar invested in a company’s stock.

Hormel Foods’ dividend yield was 2.0% based on its July 12 closing price of $37.56. In comparison, Tyson Foods’, Campbell’s, and ConAgra’s dividend yields were 1.8%, 3.4%, and 2.4%, respectively. Pilgrim’s Pride doesn’t pay dividends.


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