I recently wrote a story about 13 ultimate dividend stocks — companies with high yield (north of 2.5%), over 60 years of dividends and 30 years or more of consecutive annual increases. Then for good measure, these stocks had to beat the total return of the S&P 500 index plus dividends across the last decade.
Picks included big consumer names like Procter & Gamble (NYSE:PG) and Coca-Cola (NYSE:KO), but also off-the-beaten-path dividend stocks like Illinois Tool Works (NYSE:ITW) and Genuine Parts (NYSE:GPC).
But Melissa wrote not to talk about stocks that made the list, but to talk about stocks that didn’t make the list. Namely, Hershey (NYSE:HSY).
It’s a good stock to highlight. Performance wise, Hershey is up 14% year-to-date in 2012, up 46% in the last five years and worth 144% in the last 10 years — significantly beating the market in all time frames. Add in the dividends and you get a total return of 170% in the last decade vs. a roughly 98% total return for S&P and its dividends.
Hershey also makes the cut by having an old dividend (in force since 1930).
However, as for the size of its yield and the consistency of increases … HSY falls short. At least for my “ultimate dividends” list.
You see, Hershey yields under 2.2% currently. That’s not even pacing the rate of inflation. It’s much better than Treasuries, but not an enticing enough yield for me.
Also, for 2.5 years during the market crash and recession, Hershey didn’t budge its dividends payments. That doesn’t wash with my “ultimate dividends” list either. Of course, the dividend has soared from around 63 cents in fiscal 2002 to a pace of $1.52 this year — a huge 141% hump in dividend payouts across the last decade — but the streak was broken all the same.
So is Hershey a dud stock? Hardly. The performance of this pick is real, and its attractiveness in the consumer staples arena as a “sin stock” is hard to argue against. In times of economic stress, people eat more chocolate and buy fewer designer shoes. It’s a time-tested rule of the market and Hershey is as recession-proof an investment as they come.
The proof is in the pudding — er, chocolate sauce. Hershey, which is due to report earnings on Thursday, is enjoying 10 straight quarters of year-over-year revenue increases, and seven straight quarters of year-over-year EPS growth. It has a five-year growth rate of 25%, and one of the strongest consumer brands in the world.
Hershey has a lot to offer investors and is a decent stock for your portfolio. In fact, InvestorPlace expert Jon Markman picked Hershey as his best stock to buy and hold for all 2012 — and he’s currently in second place out of 10 investors in our annual stock-picking contest.
Hershey isn’t quite the dividend diva that some other stocks are right now. But that shouldn’t stop you from investing in this sweet consumer staples play
Do you have a stock that’s on your mind? Drop me a line at firstname.lastname@example.org and I’ll take a look at it.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.