Hormel (HRL) Gave Us a Raise with Annual Dividend Increase
We may earn money or products from the companies mentioned in this post.
While everyone else is out fighting long lines to get deals on stuff this Black Friday … I am sitting back drinking my coffee and updating our dividend stock portfolio with a smile. Earlier this week, another one of our dividend stocks announced an annual increase.
The great thing about getting this increase (of over 10% I might add), was that I didn’t have to do any work to get it. Actually, I didn’t even know about the increase for a couple days after it was announced. How crazy is that?
That is the power of investing in dividend stocks. Our portfolio of dividend stocks (33 at the time of this writing) continually earn our family passive income every single year. And on average, increase that same income by over 6% a year which is truly amazing.
The most recent dividend increase from a stock we own was from Hormel Foods (HRL).
HRL Shareholders Get a 10.3% Raise
Hormel Foods (HRL) recently announced an annual dividend increase. The company has been consistently raising dividends for the past 51+ years. How amazing is that? A company that has been handing out raises for over 5 decades!
Company shareholders will now receive $0.1875 in quarterly dividends for each share they own … instead of $0.1700 paid previously. This increase meets our desired dividend growth rate of over 6% … which is awesome!
The latest increase bumps the annual dividend for HRL up to $0.75 per share compared to $0.68 just last quarter.
Overall, that is a 10.3% increase in dividend income.
This is a welcomed increase for a company we recently started buying shares in the past couple of months.
How Much Extra Income?
We currently only own 9.0 shares of HRL in our taxable Money Sprout Index. We have been purchasing individual shares (commission free) from our Robinhood account for the past month.
Hormel Foods has been consistently increasing dividends for over 50 years, so we felt that this was a great addition to our portfolio. The recent 10% raise turned out to the be the icing on the cake.
This latest dividend increase has pushed our 12 month forward dividend income for HRL up to $6.75, compared to $6.12 just last week.
That is an annual dividend income increase of $0.63 in our taxable account. That might not seem like a lot, but combined with other increases from stocks we own … these small bumps really start to add up.
Whether they are large or small, all of these increases can really add up over the months and years.
With this latest increase by Hormel Foods, along with recent stock purchases, dividend reinvestment, and other company announced increases … our annualized forward dividend income has risen to $2,808.82.
Note – We recently started building a dividend stock portfolio in our Rollover IRA account (which is separate from the Money Sprout Index) where we purchased 100 shares of HRL. This latest dividend increase has added an additional $7 of annual income to that portfolio.
Dividend Growth for HRL
We have owned shares of Hormel Foods (HRL) for less than 1 month now. There are no opportunities for earning DRiP shares in HRL since we hold them in our Robinhood account.
As mentioned earlier, the company has had a solid (and long) history of raising dividends.
Just take a look at the annual dividend payments since 2013 to a projected 2018 annual dividend –
- 2013 – $0.34
- 2014 – $0.40
- 2015 – $0.50
- 2016 – $0.58
- 2017 – $0.68
- 2018 – $0.75 (projected)
Note – The 2018 dividend has been prorated to reflect a dividend increase at the beginning of next year.
As you can tell from the numbers above, HRL dividends have been raised consistently over the past several years. And as we display below, the dividends have been growing by double digits the past 5+ years!
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher. Hormel Foods blows that target out of the water … which is also something we look for and let’s us sleep at night knowing we are increasing our income.
Here are a few average growth rates for shares of Hormel Foods –
- 1 Year DGR – 10.29% (2017 to 2018)
- 3 Year DGR – 14.51% (2015 to 2018)
- 5 Year DGR – 17.24% (2013 to 2018)
Hormel Foods – Buy, Sell, or Hold?
As stated earlier, we have purchased 9 shares of Hormel Foods (HRL) in our taxable account over the past month. In addition, we have added 100 more shares in our tax deferred rollover IRA … which is separate from the numbers below.
Since buying our first shares last month, we have not received any dividends (yet) from Hormel Foods.
Here are a few stats from owning stock in Hormel Foods (taxable account only) –
- Total Investment – $280.82
- Shares Purchased – 9.000
- Dividends Earned – $0.00
- DRiP Shares – 0.000
With this latest increase, we will be earning a 2.40% yield on cost on our shares of HRL.
At the time of this writing, HRL meets almost all of our stock screen criteria based on the following metrics –
- Current Yield – 2.17%
- Payout Ratio – 40.43%
- P/E Ratio – 21.30
The company meets most of the criteria that we look for when picking stocks … which is a current yield >= 2%, a payout ratio under 60%, and dividend growth rates above 6%. However, the P/E ratio is slightly above the 20 that we look for.
Based on those metrics, we plan to continue buying shares of HRL as funds allow … despite the elevated P/E. When it comes down to it … that dividend is just too hard to pass up right now.
Based on all of this, we have HRL as a solid BUY for our portfolio. As long as the company continues to raise or at least maintain the current dividend … we will hold our shares and continue adding new shares. However, if the company ever makes a dividend cut … then we will sell our shares and reinvest the assets into a better dividend stock.
For now … we will continue to grow our holdings in this wonderful dividend aristocrat!
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – HRL. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.