Choosy Investors Choose J.M. Smucker And The Dividend Adds Value

Introduction

The J.M. Smucker Company (SJM) is a “Dividend Contender” that has increased its dividend for 20 consecutive years. After being overvalued for most of fiscal year 2017 (fiscal year ends in April) the company has since fallen into attractive valuation territory. As a result, the company is available at a low P/E ratio relative to historical norms and offers a current dividend yield of 2.9%. Moreover, the company has consistently increased its dividend in line with its historical 10% earnings growth.

About The J.M. Smucker Company

 The J. M.  Smucker Company: Long business description courtesy S&P Capital IQ:

“The J. M. Smucker Company engages in manufacturing and marketing branded food and beverage products on a worldwide basis.

The majority of the company’s sales are in the U.S. Its operations outside the U.S. are principally in Canada, although products are exported to other countries as well. The company’s branded food and beverage products include a portfolio of primary brands that are sold to consumers through retail outlets in North America.

The company has three segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail Pet Foods. The U.S. retail market segments represent a major portion of the company’s strategic focus – the sale of branded food and beverage products with primary positions to consumers through retail outlets in North America. Within the company’s segment results, International and Foodservice represents a combination of the strategic business areas not included in the U.S. retail market segments.

Principal Products

The company’s principal products are coffee, pet food, pet snacks, peanut butter, fruit spreads, shortening and oils, baking mixes and ready-to-spread frostings, frozen sandwiches, flour and baking ingredients, juices and beverages, and portion control products.

In the U.S. retail market segments, the company’s products are primarily sold through a combination of direct sales and brokers to food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, military commissaries, natural foods stores and distributors, pet specialty stores, and online retailers. In International and Foodservice, the company’s products are distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (restaurants, lodging, schools and universities, and health care operators).

Customers

Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to 30 percent of net sales in 2017. These sales are primarily included in the U.S. retail market segments.

Trademarks and Patents

The company’s major trademarks are as follows:

U.S. Retail Coffee: Folgers, Dunkin’ Donuts, and Café Bustelo.

U.S. Retail Consumer Foods: Jif, Smucker’s, Crisco, Pillsbury, and Uncrustables.

U.S. Retail Pet Foods: Meow Mix, Milk-Bone, Natural Balance, Kibbles ‘n Bits, 9Lives, Pup-Peroni, and Nature’s Recipe.

International and Foodservice: Folgers and Smucker’s.

Slogans or designs considered to be primary trademarks include, without limitation, ‘With A Name Like Smucker’s, It Has To Be Good’; ‘The Best Part of Wakin’ Up Is Folgers In Your Cup’; ‘Choosy Moms Choose Jif’; ‘Purely The Finest’; ‘Goodness Gracious, It’s Good’; ‘The Only One Cats Ask For By Name’; ‘Say It With Milk-Bone’; the Smucker’s banner; the Crock Jar shape; the Gingham design; the Mountain Grown design; and the Smucker’s Strawberry, Milk-Bone, and 9Lives logos.

Seasonality

The U.S. Retail Coffee and U.S. Retail Consumer Foods segments are particularly seasonal around the Fall Bake and Holiday period, which results in higher sales and profits in the company’s second and third quarters (year ended April 2017). The company’s success in promoting and merchandising its coffee and baking brands during the Fall Bake and Holiday period has a major impact on its results for a fiscal year.