Updated 3/10/25
Hershey is a name nearly everyone knows. Whether it’s classic chocolate bars, Reese’s peanut butter cups, or Kit Kat, the company has been a household staple for generations. It has built an empire in the confectionery space, consistently delivering indulgent treats that people reach for in good times and bad.
For investors focused on dividends, Hershey has been a steady performer, offering reliable income backed by strong cash flow and a recession-resistant business. However, the stock has seen some turbulence, pulling back from its highs over the past year. That raises the question: is this a good time to consider Hershey for its dividend potential, or are there risks that could dampen its sweet appeal?
Key Dividend Metrics
📢 Dividend Yield: 2.96% (higher than its five-year average)
💰 Annual Dividend Per Share: $5.48
📅 Next Dividend Payment: March 14, 2025
⏳ Ex-Dividend Date: February 14, 2025
🔄 Payout Ratio: 50.18% (comfortably sustainable)
📈 5-Year Dividend Growth Rate: 8.5%
🏆 Consecutive Dividend Increases: More than 14 years
Dividend Overview
Hershey’s current dividend yield of 2.96% stands out, especially considering that its five-year average yield has been around 2.12%. That suggests investors are getting a better-than-usual yield right now, thanks to the stock’s recent price drop.
One of the best things about Hershey’s dividend is its consistency. It has a long history of returning capital to shareholders, and with a payout ratio of just over 50%, it’s in a comfortable position. The company isn’t stretching itself thin to pay out dividends, leaving enough earnings to reinvest in the business and maintain long-term growth.
Consumer staple stocks like Hershey are known for their resilience, and the company’s ability to generate steady cash flow has allowed it to maintain and grow its dividend—even during economic downturns.
Dividend Growth and Safety
Hershey may not be the flashiest dividend stock, but it’s one of the more reliable ones. The company has grown its dividend at an average annual rate of 8.5% over the past five years, which is a solid pace considering it’s in a mature industry.
What makes Hershey’s dividend particularly secure is its strong profitability. The company operates with a profit margin of nearly 20% and an operating margin exceeding 30%. Those figures indicate that Hershey has a healthy cushion between revenue and expenses, making it easier to sustain dividend increases over time.
Return on equity (ROE) is another standout metric. At 50.4%, Hershey is exceptionally efficient at turning shareholder capital into profits. That’s a key signal of a well-managed company that can continue rewarding investors for years to come.
Chart Analysis
The chart for Hershey (HSY) reveals an interesting technical setup, with the stock showing signs of recovery from its recent downturn. Several key indicators provide insights into where things stand and what could be unfolding next.
Moving Averages and Trend Direction
HSY has spent a significant portion of the past year in a downtrend, with the 50-day moving average (light blue line) consistently trading below the 200-day moving average (dark blue line). This is a classic sign of weakness, often referred to as a “death cross” when it first occurs. However, there’s been a notable shift recently.
The stock has been rallying, climbing back toward the 200-day moving average, a level that often acts as resistance in a downtrend. The fact that HSY is now approaching this level after a strong upward move suggests that this could be a key test. If the stock can break through and hold above the 200-day moving average, it could signal a more sustained recovery.
Volume Activity and Market Participation
Volume tells the story of market conviction, and here, there are a few notable spikes. The most significant volume surge came in early December, which coincided with a sharp drop in price. This suggests heavy selling pressure, likely from institutional investors exiting positions.
More recently, volume has picked up again but in a different context—this time, it’s accompanying an uptrend. That’s a more constructive sign, as increasing volume during price appreciation often indicates genuine buying interest rather than a short-lived bounce. However, the latest sessions show average volume levels, meaning investors should watch to see if a larger wave of buyers step in.
Relative Strength Index (RSI) and Momentum
Looking at the RSI indicator (bottom panel), momentum has been improving. The RSI has climbed steadily and is now approaching the overbought zone (above 70). This suggests that while the stock has strong buying momentum, it may be nearing a short-term overextended condition. Stocks in uptrends can stay overbought for extended periods, but it’s worth noting that if RSI moves too high, some profit-taking could occur.
Price Action and Key Levels
HSY has rebounded strongly off its recent lows near $140 and is now sitting just above $185. The next big test is whether it can break past the 200-day moving average, which is acting as a ceiling for the stock. If it clears this level with strong volume, that would be a bullish confirmation.
On the downside, if HSY struggles to maintain this momentum, the 50-day moving average could act as the first line of support. Further down, $170 is a level where buyers have previously stepped in, making it another key zone to watch.
Analyst Ratings
The Hershey Company (HSY) has recently been the focus of mixed analyst sentiment, with some firms upgrading their outlook while others remain cautious.
Upgrades
📈 Citigroup shifted its stance on Hershey from a sell to a neutral rating, adjusting the price target from 159 to 154. This change reflects a more balanced perspective on the company’s prospects, suggesting that previous concerns may have eased.
📊 Deutsche Bank also upgraded Hershey to neutral from sell, with a price target of 154. The reassessment acknowledges Hershey’s ability to navigate industry challenges, though not enough to warrant a bullish stance.
Downgrades
📉 Piper Sandler downgraded Hershey to underweight from neutral, slashing the price target from 153 to 120. The firm cited concerns over persistently high cocoa prices, which could put pressure on Hershey’s profit margins in the coming quarters.
⚠️ D.A. Davidson revised its price target downward from 164 to 149, keeping a neutral rating. Rising input costs, particularly for cocoa, were flagged as key risks that could limit the company’s earnings potential.
Consensus Price Target
💡 The average analyst price target for Hershey currently stands at 156.18, with estimates ranging from 120 to 203. Among 28 analysts covering the stock, the consensus rating is hold, reflecting a balanced mix of optimism and caution.
These recent analyst actions highlight the ongoing debate about Hershey’s ability to manage rising costs while maintaining its growth trajectory.
Earnings Report Summary
Hershey wrapped up the fourth quarter of 2024 with a solid performance, proving once again that it can navigate challenges while keeping its business strong. The company managed to grow sales, boost profits, and maintain its position as a leader in the snack and confectionery space, even as it faced rising costs and supply chain pressures.
Sales and Profit Growth
Hershey pulled in $2.89 billion in net sales for the quarter, marking an 8.7% increase from the same period last year. A big part of that growth came from higher pricing, but the company also saw more demand for its products across different segments. Profits were even more impressive, with net income reaching $796.6 million, more than double what it was a year ago. On an adjusted basis, earnings per share came in at $2.69, climbing 33.2%, which was better than analysts had expected.
How Different Segments Performed
- Confectionery Sales: The core chocolate and candy business remained strong, generating $2.35 billion in sales, up 6% from last year. Both higher prices and more shipments helped drive that growth.
- Salty Snacks: This segment saw the biggest jump, with sales hitting $278.9 million, up 35.9%. A large portion of this increase came from changes in inventory management, but the demand for salty snacks remains solid.
- International Sales: Business outside the U.S. also saw gains, with sales increasing 9.8%, fueled by price increases and stronger volume growth.
Margins and Profitability
Hershey’s operating profit surged 102.3% for the quarter, reaching $939.1 million, with an operating margin of 32.5%. Even when adjusting for one-time factors, profits still grew significantly. The company benefited from price hikes, better supply chain efficiency, and cost-saving initiatives, which helped offset rising commodity prices.
Looking Ahead to 2025
While the past quarter was strong, Hershey expects sales growth to slow to about 2% in 2025, mainly driven by price increases. However, earnings per share could take a hit, with a projected decline in the high-40% range, as cocoa prices continue to surge, tax rates increase, and compensation costs return to normal levels.
Managing Challenges
One of the biggest issues Hershey faces is record-high cocoa prices, driven by supply constraints in key growing regions like West Africa. To combat this, the company is raising prices, improving supply chain efficiency, and looking for alternative sourcing strategies. Despite these hurdles, Hershey remains focused on long-term growth, cost-cutting measures, and keeping its market-leading position.
All in all, Hershey delivered a strong quarter, but 2025 could bring new challenges. The company’s ability to manage rising costs while keeping its brands strong will be key to maintaining its momentum.
Financial Health and Stability
One area where investors should pay attention is Hershey’s balance sheet. The company carries a debt-to-equity ratio of 115.54%, which is on the high side. It has around $5.45 billion in total debt but only $730.75 million in cash, meaning it leans heavily on its ability to generate operating cash flow.
That said, Hershey’s cash flow generation is strong. Over the past year, it brought in $2.53 billion in operating cash flow, more than enough to cover its dividends and ongoing business needs.
Its current ratio, which measures short-term liquidity, is just below 1.0. That means it doesn’t have a significant cushion of short-term assets over liabilities, but for a company like Hershey, which enjoys steady demand, this isn’t necessarily a red flag.
Valuation and Stock Performance
From a valuation standpoint, Hershey isn’t exactly cheap, but it’s more attractive now than it was a year ago. The stock is trading at a trailing price-to-earnings (P/E) ratio of 16.95, lower than its historical averages. The forward P/E, however, is sitting at 30.12, suggesting that analysts expect slower earnings growth in the near term.
Looking at its recent trading range, Hershey has moved between $140.13 and $211.92 over the past year. With the stock currently around $186.50, it’s in the lower half of that range. Its 200-day moving average sits at $181.98, which means the stock is hovering near a critical support level that could either hold firm or break down if market sentiment weakens.
The company’s beta is just 0.31, meaning it’s far less volatile than the broader market. That’s a key trait for dividend investors looking for stability rather than wild price swings.
Risks and Considerations
1️⃣ Rising Commodity Costs – Cocoa and sugar prices have been volatile, which could put pressure on Hershey’s profit margins. The company has pricing power, but there’s a limit to how much it can pass on costs to consumers.
2️⃣ Competition – While Hershey has a dominant position, there’s growing competition from premium chocolate brands and snack food companies expanding into its territory.
3️⃣ Debt Load – The company’s high debt-to-equity ratio means it relies on steady cash flows to meet financial obligations. If interest rates stay elevated, refinancing costs could become a bigger factor.
4️⃣ Consumer Behavior Shifts – If economic conditions worsen and consumers cut back on discretionary spending, premium chocolates and snack items could see slower growth. However, the core chocolate business tends to hold up well.
5️⃣ Stock Price Volatility – While Hershey is a low-beta stock, it has seen notable swings over the past year. If earnings disappoint or cost pressures rise further, there could be more downside before stability returns.
Final Thoughts
For dividend investors, Hershey offers a compelling mix of reliability and growth. The company has a long track record of increasing dividends, backed by strong cash flow and a business model that holds up well during economic downturns.
With the stock trading below its recent highs, the yield is more attractive than usual, making it a good option for those seeking stable income. That said, its debt levels and potential margin pressures from commodity costs are factors worth watching.
For investors looking for a well-established dividend stock with a defensive edge, Hershey remains a name worth considering.
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