Summary
- The stock has recovered mightily from the COVID-19 crash but has more room to run, as it fits the "stock up" thesis of investing as millions are stuck at home.
- The dividend continues to grow.
- When we consider the rise in both revenues and expenses, it was not surprising to see the decline in operating margin, but the company squeaked out an adjusted operating profit.
- We project revenue and sales growth in 2020.
- Looking for a helping hand in the market? Members of BAD BEAT Investing get exclusive ideas and guidance to navigate any climate. Get started today »
- Prepared by Stephanie, analyst at BAD BEAT Investing
We have discussed the Hershey Company (HSY) several times in the last few years, but have not checked in in quite some time. We were asked our take on the name and decided to review recent performance and share our current view on a possible investment in the stock. Over at BAD BEAT Investing, HSY fit into our broader view in March that investors needed to rotate some cash into dividend-paying consumer staples. The stock has recovered mightily from the COVID-19 crash but has more room to run, as it fits the "stock up" thesis of investing as millions are stuck at home. Hershey has been, and will continue to be, a beneficiary of so many staying at home and snacking. In recent weeks, solid dividend-paying names have started catching a bid on the Street. In this column, we discuss recent performance and make updates to our 2020 projections. Ultimately, we like the name under $125 for an addition to your long-term holdings.
Dividend yield improves
When a stock falls, the dividend yield improves. While shares have made a major recovery and we see upside, we think if shares pull back about 10 points to bring the yield to nearly 2.5%, that would be a great entry point if you are on the sidelines. One way in which a stock can offer a higher yield is if the company increases the dividend. Well, Hershey has been raising its dividend and most recently pumped it to $0.773 per share quarterly, and we expect it will be raised again this year. On top of the higher yield, the stock has pulled back a bit in recent weeks and is heading under $130. It has our attention. And we think valuation is reasonable, particularly as key metrics are improving.
