Hormel Foods (NYSE: HRL), the maker of Spam and other processed meat products, is up for the last week, month, quarter, six months, and year of market action (chat below). It is now trading at an all time high, up more than 13.6 percent for 2014. Long term investors should follow Hormel Foods for three main reasons.
It is a play on growth in Asia, especially China.
Hormel Foods derives a great deal of its business from operations in China. In that way, it is like Caterpillar (NYSE: CAT). The appeal of Caterpillar has been detailed in many previous articles. Any company like Caterpillar or Hormel Foods that does well from sales in the most populous nation with the most purchasing power should be considered by any long term investor.
Hormel Foods pays the shareholders not to sell.
As a Dividend Aristocrat, Hormel Foods has increased its dividend annually for at least the past 25 years. In other words, shareholders are paid not to sell by getting a raise each year with an increase in the amount of the dividend. At 1.58 percent, the dividend yield for Hormel Foods is not high. But the history of growth in dividend income more than compensates; and thus makes it appealing for long term investors. The divided increases are also protected by a solid balance sheet that has little debt to place other demands on the cash flow.
Bullish growth is also expected for Hormel Foods.
Earnings-per-share this year are increasing at a rate of 4.80 percent. For the next five years, earnings-per-share are projected to rise by 11 percent for Hormel Foods. That is a very positive trend. Quarterly sales growth is also higher than the five-year average.
Wall Street is upbeat about the future for Hormel Foods.
It is now trading around $50.70 a share. The mean analyst target price for Hormel Foods over the next yea of market action is $54.33. In addition, the short float is only 2.44 percent. Few are expecting Hormel Foods to drop with enough conviction to place money on the event.