Hormel Foods: 60-Year Dividend Streak Meets Multi-Year Lows

Hormel Foods (HRL) has raised its dividend for 60 consecutive years, a streak that puts it in the small group of Dividend Kings. The stock sits near multi-year lows. The yield has climbed to roughly 3.8%, the highest level in more than a decade. That yield comes from the price decline, not from any cut or pause in the payout.

The market has re-rated the stock lower over the past two years. Rising input costs, shifts in consumer eating habits, and pressure on some of Hormel's core processed meat lines have weighed on margins. The company's earnings have fallen from the pandemic highs, and the stock has followed. At the current price, the market is pricing in continued margin compression.

The dividend remains well covered. Free cash flow, though lower than in 2021, still more than covers the annual payout. The payout ratio sits near 75%, a level Hormel has managed in the past. The company has not cut its dividend in 60 years, and the current management has given no signal that it would start.

For yield-focused investors, the trade-off is simple: accept some near-term earnings uncertainty in exchange for a high and growing income stream. Hormel's management has taken steps to stabilize the business, including cost reductions, product innovation, and expansion into food service and international channels. The results are not yet visible in the revenue lines. The company is expected to report its next quarterly results in late August. That report will show whether those efforts are bearing fruit.

The stock's valuation, measured by price to trailing earnings, is near the low end of its five-year range. That alone does not make it a buy. It does mean that much of the bad news is already in the price. If the earnings report shows even a modest improvement in margins, the stock could re-rate higher. If it disappoints, the yield provides a floor that most cyclical stocks lack.

Hormel is not a high-growth story. It is a compounder with a long track record of returning cash to shareholders. For investors who can look past the current cycle, the entry point is the most attractive it has been in years.