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Written by Dave Kovaleski for The Motley Fool->
Hormel has increased its dividend for 59 straight years.
Analysts are bullish on Hormel's turnaround plan.
One of the best dividend stocks for almost 60 years has been Hormel Foods (NYSE: HRL).
The maker of Spam, Skippy Peanut Butter, Hormel Chili, Black Label Bacon, Planters Nuts, Jennie-O Turkey products, and various other food items has been a staple in consumers' kitchens for decades. Its roots date back to 1891, and Hormel has been a public company since 1928. And for the last 59 years in a row, Hormel has increased its dividend payout, making it a Dividend King.
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It's also the best dividend stock to buy this month. Here are three reasons why.
Hormel is not only one of the most consistent dividend stocks on the market, as evidenced by its 59-year streak of revenue growth. It also has one of the highest dividend yields you will find among non-REIT and BDC stocks.
Currently, Hormel's payout to shareholders yields 5.6%, meaning that 5.6% of the current share price is paid out as dividends annually. Part of the reason the yield is higher than average right now is that the stock price is down 13% year to date and 29% over the past 12 months.
In some cases, a high yield can indicate a dividend trap, as a tanking stock price can suggest the company is in trouble and the dividend might be cut to compensate. But Hormel has a 59-year track record of paying (and raising) that dividend, and there are no red flags suggesting the growth streak will end any time soon. In the last fiscal quarter, sales, earnings, and cash flows all increased.
Hormel stock has been trending down for the past few years, and the company has made several moves to bolster its operations and reverse the decline. The Transform and Modernize plan is a multiyear effort launched in 2024 to streamline expenses, optimize the portfolio by selling off underperforming assets, and improve the supply chain.
The goal is to increase its operating income by $250 million in 2026, and it is guiding to be on pace for that. Last fiscal year, it had $719 million in operating income. In fiscal 2026, it is guiding for $1.06 billion to $1.12 billion in operating income.
That bottom-line improvement is just one reason why analysts are bullish on Hormel stock. It has a median price target of $27 per share, implying 31% upside over the next year or so.
If the stock price rises, as analysts expect, the dividend yield will likely fall. However, investors can boost the stock's total return even higher by reinvesting the dividend. Hormel offers investors the added benefit of reinvesting their dividends without incurring brokerage charges. That gives the return a little added boost.
Also, Hormel stock is as cheap as it has been in more than a year, with a forward P/E ratio of 14 and a price-to-sales ratio of 0.95. It shows that the turnaround plan is expected to deliver returns, as well as dividends.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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