DRIPs: Kellog Co. (K) fue la selección del mes en mi columna de Moneypaper.

Related imageThe Kellogg Company is a multinational food manufacturing company headquartered in Battle Creek, Michigan, that produces cereal and convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, and vegetarian foods. The company’s brands include Froot Loops, Apple Jacks, Corn Flakes, Frosted Flakes, Rice Krispies, Special K, Cocoa Krispies, Keebler, Pringles, Pop-Tarts, Kashi, Cheez-It, Eggo, Nutri-Grain, Morningstar Farms, and many more. Its products are manufactured in 18 countries and marketed in over 180 countries. Its current total market capitalization of $23.1 billion makes K a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) and its long history of consistent earnings growth and dividend payments makes it a solid company.

It is considered a well-diversified business with a durable competitive advantage over its rivals. The company enjoys a solid management and excellent corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $4.04 per share this year, up from $3.74 per share last year, and to go to about $4.26 per share next year. It has paid dividends to investors since 1923 and has increased its payments for 12 consecutive years. During the past five years, it has increased its dividends at an average rate of 3.8%, with its quarterly payment of $0.54 currently providing a yield of 3.20%.

The value of dividends reinvestment: A hypothetical investment in Kellogg Co. has grown cumulatively (including dividends reinvested) 4,983.91% during the past forty years. However, if you remove dividend reinvestment from the equation, the same hypothetical investment would have grown only 2,198.45% during the same period of time. K still has room for significant dividend growth in the coming years, since the company’s current Dividend Payout Ratio (DPR), which is its dividend payments as a percentage of its earnings, is just 56%. According to Morningstar, the stock is trading 9.6% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon.

Technically (from the chart’s perspective) Kellogg also looks attractive, trading 20.2% below its all-time high, and 3.8%below its 200-day moving average line (200sma), while it is forming a long base (price consolidation pattern) between $82 and $59, in which $59 is acting as a technical support level. The actively managed mutual funds American Funds Investment Company of America and American Funds Income Fund of America are major shareholders of K, holding 2.58% and 1.86% of its shares respectively. K’s main competitors in the world are Nestle SA (NSRGY), The Kraft Heinz Co. (KHC) and Danone SA ADR (DANOY). K’s Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500 Index) is 0.13, so the stock is 87% less volatile than the Market.

Best and worst years during the past 10 years: Its best year was 2009, in which K returned, including dividends, 24.6%. On the flip side, its worst year was 2008, when the stock declined 13.9% including reinvested dividends. Kellogg’s dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this may be an excellent entry point for investors with a longer-term investment horizon.

Disclosure: Mario Medina has no position in Kellogg Co., and has no plans to initiate any position in the immediate future. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with K and this article is not intended as a recommendation to invest, as the information published does not take into account any subscriber’s personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice.  

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