Why This 3% Dividend Stock Is A Must Buy
Over the last couple months, I’ve shown you stocks to avoid…
Stocks to consider buying…
And some of the best stocks related to the coming Internet of Things… Which you can find linked further below.
All these recommendations are to help you either avoid pain and terrible stocks. Or to help you find potentially great stocks to invest in during this pandemic.
If you do both well, it helps you earn higher than average investment returns and build wealth.
Because the fewer investment losses you have the more capital you keep. And the more capital you keep the faster you compound your money.
Today, I want to tell you Why This 3% Dividend Stock Is A Must Buy.
J.M. Smucker (SJM) is a packaged food company that mainly operates in the United States. It sells products like pet food, coffee, peanut butter, jelly, and frozen foods.
Some of its famous brands are as follows.
- Milk Bone
- Meow Mix
- Kibbles n Bits
- Nature’s Recipe
- Rachael Ray’s Nutrish
- Dunkin Donuts branded coffee
- And more.
This is powerful, because these are the kinds of things people will continue buying no matter what the economic situation looks like.
People may stop paying their mortgage… They may stop paying their credit card bills… And they may even stop paying their utilities and buying clothes… But they won’t stop buying stuff to feed their kids and their pets.
It’s based in Orville Ohio. It has a $13.4 billion market cap. And it pays a 3% dividend… Which is reason #1 to consider buying its stock.
J.M. Smuckers 3% Dividend
Over the last decade J.M. Smucker’s paid out a total of $25.80 per share in dividends.
At today’s share count of 113 million shares that’s equal to $2.915 billion paid out to shareholders in that time.
It also grew its dividend 117% from $1.64 per share in 2011 to $3.56 per share now.
These dividend payments will help you in normal times earn cash if you take the money out. Or allow you to buy more shares over time if you reinvest the dividends.
These regular payments will help you earn more money for your retirement. And the solid, stable, and growing dividends will help in any kind of prolonged economic issues like we’re dealing with today.
It can do this because it earns solid profits. Which is reason #2 to buy J.M. Smucker for your retirement portfolio.
J.M. Smucker Earns Huge Profits
Over the last decade it earned an average operating income margin of 18.1% per year.
I look for anything above 10% so this is fantastic.
Another way to show this is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 10.5% per year on average.
I call this the “Cash Machine” metric.
I look for anything above 5% on a consistent basis for the same reasons as I look for high operating profit margins above. If a company surpasses both thresholds it makes it a great operating business that is safe and ultra-valuable.
J.M. Smucker surpasses both metrics which means it’s a world class business operation.
And since Covid its numbers have jumped even higher.
Revenue, profits, and cash flows all reached records in the last 12 months while people were stuck at home.
This shows the power of the company to survive and thrive – even during the worst economy we’ve seen since at least the end of World War 2.
And because of this continued greatness, it also has low debt levels which is reason #3 to consider buying its stock.
J.M. Smucker Has Low Debt
As of this writing SJM has $500 million in cash compared to $5 billion in debt.
As a percentage of its balance sheet total liabilities make up only 50%.
Debt makes up only 37.3% of its market cap.
And its debt-to-equity ratio is an ultra-low 0.49.
These are all well below the normal thresholds I look for in an investment. For example, I look for anything below 1 on the debt-to-equity ratio. And this adds a large margin of safety to potentially buying its stock.
Especially when you consider its great profits and cash flows over the last decade as well.
J.M. Smucker IS Cheap
With the markets at or near all-time highs you’d expect a fantastic stock like J.M. Smucker to be selling at an enormous valuation.
But it’s not.
As of this writing its P/E is 14.4.
Its P/CF is 8.8.
Its forward P/E is 14.6.
And its enterprise value to operating income – EV/EBIT is 12.2.
On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.
And on EV/EBIT I look to buy stocks below 8.
This means, J.M. Smucker is undervalued by a decent amount now.
And this means owning its stock gives you a large margin of safety in investing terminology.
When you invest in stocks that have a margin of safety it makes the investment safer. And it also means you should expect to earn higher returns owning it in the coming years.
The inverse of this is also true…
When you invest in a stock without a margin of safety it makes the investment riskier. And it also means you should expect to earn less owning its stock going forward.
With J.M. Smucker being undervalued, buying its stock today offers you a gigantic margin of safety… Especially when considering the other great things about it above.
If you’re looking for a solid, safe, stable, and enormously profitable investment to buy to earn high and safe returns for your portfolio – consider investing in J.M. Smucker and its 3% dividend.
You can also use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times.
- The Best Internet of Things Stock
- One Thing That Will Increase Your Investment Returns More Than Anything
- This Top Robotics Stock Isn’t One You’d Think Of
- The Best Internet Security Stock
- Should You Buy Oracle?
- The Best Unknown Artificial Intelligence Stock
- 5 Reasons To Buy Emerson Electric
- The Best Telehealth Stock
- 1 More Reason To Buy CVS
- 3 Reasons To Buy Qualcomm – And 1 Not To
- 3 More Reasons To Buy Cisco
- 3 Reasons To Buy Activision
- 3 Reasons To Buy Dollar General – And 1 Not To
- 4 Reasons To buy eBay
- Should You Buy Lockheed Martin?
- Is Xilinx A Buy?
- AMD Buys Xilinx For $35 Billion
- Is eBay Still A Buy After Earnings?
- Is McDonald’s Still A Buy?
- Should You Still Buy Emerson After Its 25% Rise Since August?
- Should You Buy Walmart After Online Sales Grow 79%?
- Is Qualcomm A Buy After Sales Rise 73%?
- Should You Buy Cisco Before Earnings?
- Should You Buy Oracle Before Earnings?
- Why Intel Is Still A Buy After Its Latest Earnings…
- Buy This 7.9% Dividend King Today
- CVS Is Still A Buy After A Record 2020
Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.