Monday August 06, 2012
by Vita Nelson, editor MoneyPaperConAgra Foods (
CAG) is our latest featured dividend reinvestment stock selection. Value Line rates the company's Financial Strength as A+ and its Stock Price Stability at 100.
With much of the nation's midsection baking under record heat and drought conditions widespread, crops like corn and wheat stand to be reduced this year, leading to higher prices. That extends to the livestock that needs to be fed, so consumers are facing a specific bout of inflation.
But food processors should be able to pass along the higher costs and may even log higher profits, thanks to the efficiencies that they have achieved over the past decade, when most went through restructuring, including divestitures and acquisitions.
Those companies were forced to figure out what product lines resulted in the most consistent sales and earnings. As always, out of adversity, success in the marketplace is the end result.
Founded in 1919, Conagra is a major packaged food company whose products include such familiar brand names as Healthy Choice, Banquet, Orville Redenbacher, Marie Callenders, Peter Pan, Slim Jim, Reddi-wip, Swiss Miss, Wesson, Del Monte, and Hunt's.
Consensus estimates call for the company to earn about $1.98 per share in the fiscal year that ends next May and $2.12 in fiscal 2014, compared with $1.84 in fiscal 2012.
Stock repurchases have reduced the number of outstanding shares from 529.3 million in 2003 to 415.4 million today and ConAgra has increased its dividend in each of the past five years, providing a yield of 4.0%.
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