13 Jan
5 Hot Sauces That Pay Dividends
In honor of National Hot Sauce Day (January, 22nd), we look at 5 hot sauces that “pay you dividends”.
Many of the top selling hot sauces are privately owned and therefore cannot be invested in via the stock market.
But that’s ok! We’ve uncovered 5 hot sauces that are owned by publicly traded companies.
Should you buy stock in any of these companies, every time they sell hot sauce, you profit alongside them. How sweet, or, uh, HOT is that?
Let’s get cookin’!
Trappey’s hot sauce is owned by B&G Foods, 5.69% dividend yield.
With zero years of dividend growth, 98.84% payout ratio and paying the same dividend for almost 16 straight quarters, B&G is the riskiest dividend on the list.
Their strongest brands are probably Green Giant, Cream of Wheat, Ortega and Mrs. Dash, followed by mostly 2nd tier brands.
In December of 2020 they acquired Crisco, which has been their MO – using debt to acquire food brands, scaling them up and then raising prices.
They have stable cash flow, but I do not get the warm and fuzzy feeling as a dividend growth investor from B&G Foods.
Tapatío hot sauce is brought to you by Kraft-Heinz, 4.28% dividend yield.
Kraft-Heinz was created in a 2015 merger between Kraft Food Group and H.J. Heinz, and was orchestrated by Warren Buffet’s Berkshire Hathaway and 3G Capital.
The thing with KHC is that this is not a high growth industry, and therefore the previous high stock valuations (P/E) were not justified. Although International expansion could potentially be a pathway to growth.
Their dividend was cut from $0.63 to $0.40 in March of 2019 where it has remained ever since.
Given that Kraft-Heinz has strong, center shelf household brands, their cash flows should remain steady. Especially since food is not cyclical they will have plenty of cash rolling in.
The dividend should be fine as the payout ratio is at 57% currently, just don’t expect much in terms of capital appreciation.
Ah the famous and ubiquitous Taco Bell, owned by YUM! Brands and currently paying a 1.50% dividend yield.
YUM! Brands also owns Kentucky Friend Chicken, Pizza Hut and The Habit Burger Grill, has a presence in 150 countries with over 50,000 restaurants – 60% of which are abroad. KFC is responsible for almost half of YUM! Brands’ total revenue.
YUM! aggressively repurchases shares, which is great as there are less shares outstanding to distribute earnings across – which means an increase in EPS. Since 2011, YUM! has decreased shares outstanding by 33%.
They have raised their dividend 4 years straight, with a 5 year growth rate of 8.03%, a low payout ratio of 43.99%. The forward annual dividend of $2.00/share should have no problems increasing with cash flows returning to (hopefully) pre-pandemic levels.
Our top company, McCormick owns the top two selling hot sauces, according to recent Instacart data, Frank’s Red Hot and Cholula.
McCormick has been around since 1889, currently pays a 1.56% dividend yield, has a 10 year dividend growth rate of 8.5% and has been raising their dividend for 35 years.
McCormick is huge in their industry as they currently own about 20% of the global market share of seasonings and spices and are 4X larger than their next closest competitor.
Given their portfolio of popular and successful products, they have pricing power to negotiate with retailers. They are a staple food and food ingredient company that I fully expect will raise their dividend another 15 years – king them a dividend king.
Let us know what your favorite hot sauce is in the comment section!
Cheers and never stop investing in yourself.
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