Discover Strong Dividend Stocks to Enhance Your Portfolio
Explore the Best Dividend Stocks for Steady Returns
For those hunting for reliable passive income in the stock market, there’s a lot to consider. One appealing strategy is to seek out companies with robust and stable operations paired with dividend yields approaching their 10-year highs. While this combination is not the norm, at the moment, The Hershey Company (NYSE: HSY) and MTY Food Group (OTC: MTYF.F) are shining examples that fit the bill.
With both companies experiencing declines of 12% and 20% from their 52-week highs—along with being 33% and 39% off their all-time peaks—now might be an opportune time for investors to consider these lucrative dividend stocks at attractive prices.
In this article, we’ll delve into the compelling reasons why investing in Hershey and MTY could be a worthwhile addition to your portfolio, especially as their dividend yields stand at 2.9% and 2.3%, nearing decade-long highs.
Hershey: A Foundation of Safety in Snacks
One standout factor for The Hershey Company is its stability. As a player in the recession-resistant sectors of chocolates and snacks, Hershey demonstrates consistent performance, illustrated by its beta of 0.37. A beta lower than 1 indicates that the stock is less likely to see major downturns during market declines.
Companies with such solid betas can be considered essential elements for any investment portfolio. Currently, Hershey is experiencing a substantial 33% drop from its historical high, marking it as one of the most significant market shifts the company has faced in the last thirty years, second only to the 50% and 40% plunges observed during the 2008 and 2000 crashes.
Despite this downturn, it raises the question: Is Hershey suffering permanent damage? The answer leans towards no. Prior to the recent drop, Hershey's enterprise value-to-EBITDA ratio had peaked at an all-time high of 24. As it stands now, the ratio has corrected to 15, presenting a more favorable valuation compared to its historical average of 18.
The challenges Hershey currently encounters, ranging from new operational systems to fluctuating cocoa prices, alongside a cautious consumer market, should not overshadow its enduring brand strength. Years down the road, these hurdles will likely be seen as mere blips, with Hershey's iconic brands, like Hershey’s, Reese's, and Kit Kat, continuing to thrive.
In addition, Hershey is solidifying its market position by expanding its offerings. The company's acquisitions of brands like Skinny Pop Popcorn and Dot's Homestyle Pretzels have resulted in impressive sales growth, significantly bolstering overall revenue.
Moreover, despite facing recent pressures, Hershey has increased its dividends twice within a short span, raising them by an impressive 32%. Following this generous hike, only 55% of Hershey's net income is allocated to dividends, indicating room for further increases in shareholder payouts consistent with its long-term growth strategy.
MTY Food Group: Diversification as a Key Strength
Transitioning to MTY Food Group, this company differentiates itself through its extensive diversification across its diverse brands. Operating approximately 90 quick-service brands, MTY is well-equipped to address consumer preferences across all seasons and an array of cuisines.
This portfolio diversity ensures that MTY can cater to various consumer needs throughout the year, adapting to seasonal preferences effectively. For instance, their frozen treat and smoothie options take center stage in warmer months, while hearty offerings like Wetzel's Pretzels find favor during the winter.
Moreover, MTY's franchisee-operated model—where less than 200 of its nearly 7,000 locations are operated directly—positions the company as an asset-light enterprise. This strategy enables MTY to mitigate risks while bolstering free cash flow (FCF) margins.
Interestingly, even during the pandemic's peak, MTY managed to sustain a remarkable 20% FCF margin. Given current challenges that have compressed margins, the company is still recognized for its impressive FCF growth over the past decade.
MTY's adeptness at re-investing its solid FCF into prudent acquisitions—totaling 27 worth over $1.7 billion this past decade—fuel further growth potential while reinforcing a positive cycle of expansion, enhancing shareholder value.
On top of that, MTY offers a tantalizing 2.3% dividend yield that sits at a decade-high, indicating significant room for management to increase shareholder returns; it utilizes only 14% of its FCF for dividends. This level of retention provides the flexibility for MTY to potentially triple its yield while still maintaining operational fluidity.
In light of recent stock dips, managers have initiated share buybacks, taking advantage of lower prices— bolstering the total value returned to shareholders as they continue to shrink the share count over time.
Don't Miss This Investment Opportunity
Have you ever felt that you missed out on securing a position in leading stocks? Today's environment might be presenting a second opportunity worth exploring.
Occasionally, experienced analysts signal recommendations for stocks poised for notable gains—these “Double Down” alerts highlight companies that seem primed for a lift in valuations, encouraging eager investors to seize the moment.
This trend outlines significant previous growth, showcasing giants like Amazon, Apple, and Netflix, where early investments yielded transformative profits. Current recommendations point towards three more companies showing potential for similar trajectories.
In conclusion, Hershey and MTY Food Group not only present their unique attributes of stability and adaptability but also position investors for potential growth through dividends and strategic expansions.
Frequently Asked Questions
What are the most appealing features of investing in Hershey?
Hershey provides consistent performance and stability, especially with its strong brand recognition in the chocolate and snack market, along with a reasonable dividend yield.
Why is MTY Food Group considered a safe investment?
MTY's diversification across multiple food brands and its asset-light business model make it resilient, helping it navigate varying consumer demands successfully.
What dividend yield do Hershey and MTY currently offer?
Hershey has a dividend yield of 2.9%, while MTY Food Group offers a yield of 2.3%, both indicating their commitment to rewarding shareholders.
How has the performance of these companies been affected by market downturns?
Both companies saw declines in share prices but maintain strong fundamentals, suggesting they can recover and continue to grow in the future.
What should investors keep in mind about these stocks?
Investors should consider the stability, dividend yields, and market positions of both companies, as their ongoing strategies suggest long-term viability.
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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.
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