I prefer to use the term ‘frugal’, but in reality I’m just cheap. That is a core aspect of my life and my investment philosophy. I just don’t like paying too much for anything. That’s why, if I could just buy three stocks when 2024 comes to an end, that PepsiCo(NASDAQ: PEP), Hormel food(NYSE: HRL)And Hershey(NYSE:HSY). Here’s a quick look at all three of these attractive dividend stocks.
PepsiCo has been increasing its dividend annually for more than five decades, making it a Dividend King. That is a very elite group of companies that you don’t join without having a very strong company. The company’s dividend yield is currently around 3.4%, which is close to the highest level in the last four decades. In other words, it looks like a fallen angel, which means it’s a good company facing temporary challenges. I’m watching the shares carefully today.
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There are many things to like here. For example, PepsiCo is the second largest non-alcoholic beverage company in the world Coca-cola. It is the No. 1 maker of salty snacks through the Frito-Lay brand. And it has a strong position in packaged foods with its Quaker Oats business. Its size, research and development capabilities and distribution reach make it a valued partner for retailers across the spectrum.
While the company may face some near-term challenges (which have slowed growth), including possibly more government regulation in the US market, it seems very likely that PepsiCo will adapt and prosper again in the future (just as it did in the past). ). There’s probably no rush to jump on board, but if you don’t look like 2024 is coming to an end, you might miss your chance to own this gem of a consumer goods company.
I have owned Hormel for several years, and things are not going well for me at the moment. But I’m not selling it, and if it wasn’t already a full position in my portfolio, I would buy more shares. Like PepsiCo, Hormel is a dividend king, and its dividend yield is currently near an all-time high of 3.8%. Dividend investors should find the stock very attractive as the year comes to a close. But it is not without reason that a share has a historically high return. There are problems.
The interesting thing is that all the problems are manageable when looked at individually. Hormel, for example, is having trouble passing on rising costs to customers. It will eventually figure this out with small price increases over time, or it will reduce costs.
Hormel has also faced a slow pandemic recovery in China, where it has significant sales. This isn’t unique to Hormel, and over time, customers will likely return. Hormel recently bought Planters just as the nut segment of the snacking niche was starting to slow down.
Hormel has a long history of successful innovation, which it is already putting into practice with Planters and achieving success. Yes, there are problems, but Hormel should be able to solve them. The problem I think Wall Street has right now is that this iconic food producer is dealing with a list of problems all at once.
I’m happy to be able to reinvest the dividend, essentially buying more shares each quarter while I wait for Hormel to fight through the headwinds it’s facing. Again, there’s probably no rush, but if you don’t at least start looking now, you could miss out on the long-term opportunities presented by Hormel’s historically high yield.
I had been eyeing Hershey for years, hoping that one day I would have the opportunity to buy it for a reasonable price. That time was 2024, and there’s still a chance to get in if you act quickly.
While not a Dividend King, Hershey’s dividend has grown steadily over time (the annual streak is up to 15 years). That said, dividend growth has been truly impressive, at an annual rate of 10% over the past decade (with even higher dividend growth rates over the past few years). The dividend yield is currently at the high end of the stock’s historical yield range, at 3.2%.
I bought an entry-level position and then quickly built a full position after listening to management’s comments on cocoa prices. Cocoa, a key ingredient in chocolate, has gone through the roof due to a unique set of circumstances that go far beyond general inflation trends. That will be a problem for the company, but the cocoa market already seems to be adapting.
Either way, Hershey’s growth will likely come from salty snacks and non-chocolate treats as it expands into new categories. If you don’t mind jumping in when others are afraid — a contrarian approach to investing — Hershey seems like a solid, low-risk candidate. Just like with Hormel, I am happy to have my stock dividend reinvested.
PepsiCo, Hormel and Hershey are all well-managed companies. The proof of that lies in their long history of success and impressive dividend statistics. Sure, everyone is facing headwinds right now, but they’ve all been through tough times before and managed to survive just fine. It may take a few years, but don’t wait too long if you like reliable dividend stocks. These companies are for sale as 2024 comes to a close, but they may not be for sale forever.
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Reuben Gregg Brewer has positions in Hershey and Hormel Foods. The Motley Fool has positions in Hershey and recommends him. The Motley Fool has a disclosure policy.
If I Could Only Buy Three Consumer Staples Stocks in the Last Half of 2024, I’d Choose These Originally published by The Motley Fool
