Dividend Aristocrats In Focus: The J.M. Smucker Firm

Up to date on March eighth, 2025 by Felix Martinez

At Certain Dividend, we regularly focus on the deserves of Dividend Aristocrats. We imagine this unique group of shares has sturdy manufacturers, constant earnings even throughout recessions, and sturdy aggressive benefits. These qualities enable Dividend Aristocrats to boost their dividends yearly, whatever the financial system’s state.

Of the ~505 shares comprising the S&P 500 Index, simply 69 qualify as Dividend Aristocrats. You possibly can obtain a replica of the complete record of all 69 Dividend Aristocrats, full with metrics like dividend yields and P/E ratios, by clicking on the hyperlink beneath:

Disclaimer: Certain Dividend isn’t affiliated with S&P World in any manner. S&P World owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet relies on Certain Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s primarily based. Not one of the info on this article or spreadsheet is official information from S&P World. Seek the advice of S&P World for official info.

We individually evaluate all of the Dividend Aristocrats every year. The following within the sequence is The J.M. Smucker Firm (SJM).

J.M. Smucker has a protracted historical past of dividend development, having raised its dividend for 28 years in a row. This text will focus on the numerous elements for J.M. Smucker’s lengthy dividend historical past and outlook.

Enterprise Overview

J.M. Smucker has been in enterprise for greater than 100 years. It was based in 1897 at a small cider mill in Orrville, Ohio, within the nineteenth century.

At present, J.M. Smucker has a market capitalization of $12.5 billion and generates greater than $8.2 billion annual income. It’s a packaged meals and beverage firm that owns well-known manufacturers reminiscent of Smucker’s, Jif, Folgers, and so forth. The corporate additionally owns a pet meals enterprise with manufacturers reminiscent of Milk-Bone and 9Lives.

Supply: Investor Presentation

In late February, Smucker’s reported (2/27/25) outcomes for the third quarter of fiscal 2025. The corporate reported internet gross sales down 2% to $2.2 billion resulting from divestitures and acquisitions. Adjusted EPS rose 5% to $2.61, although a $6.22 per share internet loss was recorded resulting from impairment prices. Working money circulate fell to $239.4 million, impacted by greater working capital wants and tax timing.

Gross revenue grew 7%, pushed by pricing and price efficiencies, however working earnings declined resulting from impairment prices. Espresso gross sales rose 2% on greater pricing, whereas pet meals and Candy Baked Snacks noticed declines of 9% and seven%, respectively, resulting from decrease demand and contract manufacturing losses. Provide chain disruptions additionally affected efficiency.

Smucker up to date its fiscal 2025 outlook, projecting a 7.25% gross sales improve and adjusted EPS of $9.85–$10.15. Free money circulate is predicted at $925 million. The corporate focuses on price management and development methods to drive long-term shareholder worth.

Development Prospects

J.M. Smucker’s trade isn’t rising quick, as demand for meals isn’t rising an excessive amount of primarily based on financial growth. As a substitute, meals consumption is mostly rising rather less than financial output, as it’s largely tied to inhabitants development. Nonetheless, J.M. Smucker can generate development in several methods, regardless of being energetic in a lower-growth trade.

Acquisitions have been a serious supply of enterprise development for the corporate previously.

The corporate often acquires smaller firms which are then benefitting from J.M. Smucker’s gross sales community. On high of that, the corporate is ready to seize synergies on the subject of administration and different areas, which drives the profitability of the businesses J.M. Smucker acquires.

For instance, on November seventh, 2023, Smucker’s accomplished the acquisition of Hostess Manufacturers (TWNK) in a cash-and-stock take care of worth of $5.6 billion, which incorporates debt. Hostess Manufacturers has many candy baked items manufacturers, which is able to broaden the product portfolio of Smucker’s and create synergies. Nevertheless, the deal worth is about 13.2 occasions EBITDA of Hostess Manufacturers, after the anticipated synergies have been taken into consideration.

In the long term, we imagine that present margin headwinds from rising commodity costs will wane, or that the corporate will absolutely move on these rising prices to customers. Some natural enterprise development, some M&A, and the influence of share repurchases ought to enable J.M. Smucker to develop its earnings-per-share by round 4% a 12 months in the long term, we imagine.

Supply: Investor Presentation

Aggressive Benefits & Recession Efficiency

J.M. Smucker isn’t the most important participant within the meals and drinks area by far, however it’s among the many main gamers within the energetic segments, reminiscent of espresso offered at retailers, peanut butter and different breakfast spreads, pet meals, and so forth.

J.M. Smucker’s manufacturers are well-known and appreciated amongst customers, thus it isn’t very possible that new market entrants will disrupt the corporate’s core enterprise.

A serious benefit for J.M. Smucker is its excellent recession resilience. Whereas customers do reduce on their spending throughout financial downturns, they usually achieve this in discretionary areas—autos, electronics, attire, and so forth. This is the reason J.M. Smucker and most of its friends have outperformed throughout recessions previously.

The corporate’s earnings-per-share efficiency throughout the Nice Recession is beneath:

2007 earnings-per-share of $3.15
2008 earnings-per-share of $3.77 (20% improve)
2009 earnings-per-share of $4.37 (16% improve)
2010 earnings-per-share of $4.79 (10% improve)

We see that J.M. Smucker not solely managed to develop its earnings-per-share throughout yearly of the Nice Recession but in addition generated a really compelling common development charge of 15% in that timeframe—barely every other firm has managed to carry out so properly throughout the disaster.

The identical held true throughout the pandemic, as J.M. Smucker additionally managed to develop its earnings-per-share by 14% in 2020 when the financial system was affected by lockdowns and different COVID measures.

J.M. Smucker’s recession resilience is one in all its largest benefits, making it an appropriate alternative from a danger perspective.

Valuation & Anticipated Returns

Utilizing the present share worth of ~$117 and the midpoint for earnings steering of $8.50 for the 12 months, J.M. Smucker trades for a price-to-earnings ratio of 13.7. Given the corporate’s sturdy recession efficiency, and a very sturdy development outlook, we really feel {that a} goal price-to-earnings ratio of 16 is acceptable. That is additionally roughly consistent with the corporate’s 10-year historic common.

Consequently, J.M. Smucker is barely undervalued. An increasing P/E a number of may add 3.5% to SJM’s annual returns over 5 years. Other than adjustments within the price-to-earnings a number of, future returns can be pushed by earnings development and dividends.

We count on 4% annual earnings development over the following 5 years. As well as, J.M. Smucker inventory at the moment has a dividend yield of three.7%.

Complete returns may encompass the next:

4% earnings development
3.5% a number of growth
3.7% dividend yield

J.M. Smucker is thus anticipated to return round 11.2% yearly by 2030. This can be a strong anticipated charge of return, excessive sufficient to warrant a purchase suggestion.

Last Ideas

J.M. Smucker is a top quality firm with a robust dividend development observe file and an excellent capacity to face up to recessions.

Shares are buying and selling barely beneath our honest worth estimate, resulting in excessive double-digit anticipated complete returns. The present dividend yield is strong and appears secure, however we charge J.M. Smucker a purchase proper now due to the anticipated complete returns of about 11.2% over the approaching years.

Moreover, the next Certain Dividend databases include probably the most dependable dividend growers in our funding universe:

If you happen to’re in search of shares with distinctive dividend traits, contemplate the next Certain Dividend databases:

The key home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: