Hormel Foods (HRL) has quietly assembled a large portfolio of well-known food brands… The image below shows many of the company's well-known brands.
The company's more successful brands include: Skippy peanut butter, Spam, Dinty Moore, Jennie-O Turkey, Muscle Milk, and the recently acquired Applegate Farms.
The Applegate Organics Acquisition
Hormel recently acquired Applegate Farms for $775 million. Applegate Farms is the leader in natural and organic lunchmeat. Applegate Farms is expected to generate sales of around $340 million in fiscal 2015.
This means Hormel is acquiring Applegate Farms for a price-to-sales ratio of 2.3. For comparison, Hormel currently trades at a price-to-sales multiple of 1.6. Other health-conscious publicly traded food companies trade for a price-to-sales ratio of 2 or higher. WhiteWave Foods (WWAV) has a price-to-sales multiple of 2.5, and Lifeway (LWAY) has a price-to-sales ratio of 2.1.
Hormel appears to have paid around fair value for a premium health food brand with the Applegate Farms acquisition. Hormel will leave Applegate to operate as a stand-alone company. Applegate Farms should benefit from Hormel's larger advertising budget and better supply chain.
Hormel's Stability & Longevity
Hormel was founded in 1891. Since that time, the company has grown to reach a market cap of $15.3 billion.
Hormel is a very shareholder friendly business. The company has paid increasing dividends for 49 consecutive years, making Hormel a Dividend Aristocrat.
The company currently has a dividend yield of 1.7% and a payout ratio of 36.0%. Hormel's conservative payout ratio makes it extremely likely the company will continue to pay increasing dividends.
When the company increases its dividend payments in 2016, Hormel well join the exclusive Dividend Kings list – stocks with 50+ years of consecutive dividend increases. Click here to see all 16 of the Dividend Kings analyzed.
