Dividend Aristocrats Part 8 Of 52: Hormel Foods

Hormel Foods (HRL) was founded in 1891 by George Hormel in the small town of Austin Minnesota.

Today, Hormel has a market cap of $17.4 billion.  The company has assembled a portfolio of well-known food brands.  The image below shows many of the company’s most popular brands.

Source: Hormel Foods Company Website

Hormel operates in the slow changing packaged meat and packaged food industry.  The stability of the industry in general, and Hormel in particular, has resulted in a tremendous streak of dividend growth.

Hormel has raised its dividends for 49 consecutive years.  In 2016, the company will join the exclusive Dividend Kings – dividend stocks with 50+ consecutive years of dividend increases.  Click here to see all 17 Dividend Kings analyzed.

Hormel’s Competitive Advantage

More than 30 of Hormel’s brands hold the #1 or #2 position in their respective market category.  The company’s competitive advantage comes from built up brand equity.

Over the last 3 years, Hormel has averaged advertising expenditures of about $100 million a year.  The company only spends around 1% of sales revenue a year on advertising.  This is far below what many other packaged foods companies spend.

Hormel does not need to advertise as much as its peers because many of its brands are already very well known.  Skippy, Spam, and Hormel are all well-known brands.  For younger consumers, Applegate Organics, Muscle Milk, and Jennie-O are likely very well known.

Where Hormel differentiates itself from its competitors is its growth through acquisitions.  The company has realized excellent growth by acquiring up-and-coming brands and then growing them.

Growth Prospects & Total Return

Recent examples of large acquisitions for Hormel are CytoSport (makers of Muscle Milk) and Applegate Organics.

CytoSport was acquired for $450 million.  Applegate Organics was acquired for $775 million.  Older acquisitions for Hormel that were transformative for the company were the 2001 acquisition of Jennie-O Turkey, and the 2013 acquisition of Skippy peanut butter.