The board of The J. M. Smucker Company (SJM) has approved a quarterly dividend hike of 10.0%, thereby maintaining the trend of rewarding its shareholders consistently. The new dividend of 64 cents is up from the previous quarterly dividend of 58 cents per share. The dividend will be paid on Sep 2, 2013 to shareholders of record as of Aug 15.
Smucker has been increasing its rate of quarterly and annual dividends consistently and this dividend hike represents the thirteenth consecutive year of dividend growth. However, this year, the rate of dividend hike was lower than last year’s hike of 11.5%. In Jul 2013, the company had increased its quarterly dividend from 52 cents to 58 cents. (Read: Smucker Boosts Dividend).
Apart from increasing dividends, Smucker also repurchases shares consistently. In Jan 2013, Smucker’s board again increased the share repurchase authorization by five million shares as it had done in 2012.
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.
Recently, the company reported its fourth-quarter fiscal 2014 adjusted earnings (excluding special project costs) of $1.21 per share, which declined from the prior-year adjusted earnings of $1.29 per share by 6% despite benefiting from lower outstanding share count. The year-over-year decline in earnings was due to lower operating income and the impact of a higher effective tax rate, partially offset by benefits from other income and lower interest expense. Earnings however exceeded the Zacks Consensus Estimate of $1.16 by 4.3%.
Net sales in the fourth quarter declined 8% year over year to $1.234 billion. The results slightly lagged the Zacks Consensus Estimate of $1.236 billion. The decline was due to an 8% decrease in net price realization in response to lower commodity costs realized during the year, largely in retail and foodservice coffee. (Read: Smucker Beats on Earnings with Favorable View).
Recently, Smucker increased its packaged coffee prices of Folgers and Dunkin' Donuts branded coffee products by an average 9% in response to the continuous hike in green coffee costs. (Read: Smuckers Raises Coffee Price). The rise in coffee prices drove the guidance for fiscal 2015. The company now expects net sales to increase year-over-year by approximately 5% compared to 5% sales decline in fiscal 2014. Adjusted earnings are expected in the range of $5.95 to $6.05 per share, higher than $5.64 per share reported in fiscal 2014.
Smucker currently holds a Zacks Rank #3 (Hold).
Some better ranked food companies include TreeHouse Foods Inc. (THS), BRF S.A. (BRFS) and Pinnacle Foods Inc (PF). While TreeHouse Foods and BRF S.A. sport a Zacks Rank #1 (Strong Buy), Pinnacle carries a Zacks Rank #2 (Buy).
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