Thursday, November 03, 2011

Hormel (HRL) 2011 Review

Hormel Foods (HRL) is an international manufacturer and marketer of consumer branded meat and food products which are sold fresh, frozen, cured, smoked, cooked and canned (Hormel, Always Tender, Cure 81, SPAM, Dinty Moore, Jennie-O, Mary Kitchen, Little Sizzlers, Chi-Chi’s and Kid’s Kitchen). 

HRL has grown profits and dividends at an 8-10% annual rate for the past 10 years earning a 15% return on equity.

Despite rising feed and energy costs, the company should continue to grow as a result of:

(1) foreign expansion,

(2) rising market share,

(3) acquisitions, especially in the high margin ethnic food category,

(4) aggressive cost reductions.


(1) highly competitive industry,

(2) its cost of goods sold are largely commodities; therefore, volatile prices can impact margins,

(3) its international exposure subjects it to currency fluctuations and foreign regulations.

Hormel is rated A by Value Line, has no debt and its stock yields approximately 2.0%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
HRL 2.0% 13% 32 10
IND 2.5 6 42 NA

Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
HRL 0% 15% 2 11% A
IND 40 18 NA 7 NA


Note: HRL’s stock price has made great progress off its March 2009 low, quickly surpassing the down trend off its April 2008 high (red line) and the November 2008 trading high (green line). Long term, the stock is in an up trend (straight blue lines); intermediate term, it is also in an up trend (purple lines). The wiggly blue lines are Bollinger Bands. The Dividend Growth Portfolio owns a one half position in HRL, having Sold Half when the stock entered that range. Shares would be Bought back at $17; the lower boundary of its Sell Half Range is $30.