Updated 3/10/25

Hormel Foods has been a staple in American households for more than a century. Known for its popular brands like Spam, Skippy, Jennie-O, and Planters, the company operates in the consumer staples sector, where stability and steady cash flow are the name of the game.

For dividend investors, Hormel has been a reliable choice. It boasts a long track record of dividend increases, which is a major draw for those looking to build passive income. However, the stock has faced some challenges recently, lagging behind the broader market with a notable price decline over the past year. While the S&P 500 has been climbing, Hormel’s stock has dropped about 12%.

This raises an important question for dividend-focused investors: Does Hormel still deserve a spot in a long-term income portfolio? Let’s break it down.

📊 Key Dividend Metrics

📈 Dividend Yield: 3.87% (above its five-year average)
💵 Annual Dividend: $1.16 per share
📊 Payout Ratio: 82.43% (on the higher side)
🏆 Dividend Growth Streak: 58 consecutive years
📈 Five-Year Dividend Growth Rate: Around 6%
📅 Ex-Dividend Date: January 13, 2025
💰 Next Payment Date: February 18, 2025

Dividend Overview

When it comes to dividend reliability, few companies match Hormel’s record. With nearly six decades of uninterrupted dividend growth, it holds the elite status of a Dividend King. That kind of consistency is rare and speaks to the company’s ability to generate steady cash flow regardless of market conditions.

Right now, the dividend yield is sitting at 3.87%, which is noticeably higher than its historical average. That’s largely due to the stock price slipping, but for income investors, it presents an opportunity to lock in an above-average yield.

The only red flag here is the payout ratio of 82%, which is higher than ideal. It means Hormel is using a significant portion of its earnings to pay dividends, leaving less room for reinvestment or further dividend hikes. That’s not necessarily a dealbreaker, but it does suggest that future increases could slow down unless earnings pick up.

Dividend Growth and Safety

The safety of a dividend boils down to two things: cash flow and earnings stability.

Hormel’s dividend has grown at a steady 6% annual rate over the last five years, but with earnings down 22% year over year, that pace could slow. The good news is that operating cash flow of $1.17 billion is more than enough to cover the dividend. So while the payout ratio is high, the company isn’t in danger of cutting its dividend anytime soon.

One thing to watch is profitability. Operating margins have slipped to 7.96%, and net margins are at 6.35%, which are both below historical averages. If this trend continues, it could put pressure on dividend growth.

For now, the dividend remains safe, but future increases might not be as aggressive as they’ve been in the past.

Chart Analysis

Price Action

Hormel Foods (HRL) has been in a downtrend for nearly a year, with lower highs and lower lows defining its trajectory. The stock had a brief rally in early December but failed to sustain momentum, rolling over again as it struggled against resistance. Recently, the price has started to tick higher, closing at 29.94, which suggests an attempt to stabilize after a prolonged decline. However, it remains well below previous highs, indicating that sellers still have control overall.

Moving Averages

The 50-day moving average (light blue line) has been below the 200-day moving average (dark blue line) for several months, a clear sign of a bearish trend. The 50-day average has also been sloping downward, reinforcing the idea that momentum has been weak.

That said, the stock is now approaching its 50-day moving average from below, and a breakout above this level could indicate that buyers are starting to gain some ground. The longer-term 200-day moving average remains far above, meaning the overall trend has not yet reversed.

Volume Activity

Volume has been relatively steady, with occasional spikes that coincide with sell-offs. The most notable surge in volume came in early February, suggesting a significant round of selling pressure. Since then, volume has returned to a more typical level, and the recent uptick in price has not been accompanied by heavy buying. For any potential trend reversal to be confirmed, stronger volume would need to accompany upward price movement.

Relative Strength Index (RSI)

The RSI, which measures whether a stock is overbought or oversold, has been trending higher after spending some time in oversold territory. Currently, it sits in a more neutral zone, indicating that selling momentum has slowed, but the stock is not yet overbought. If RSI continues to rise, it could suggest that momentum is shifting toward buyers, but for now, it remains in a wait-and-see zone.

Analyst Ratings

🔼 Recent Upgrades

In recent months, Hormel Foods has received positive attention from analysts. 🟢 In January 2025, Barclays upgraded the stock to overweight from equal-weight and raised the price target to 36 from 35. This upgrade was driven by expectations of improved performance in key product segments and a more favorable cost environment.

🟢 Similarly, in February 2025, Citigroup adjusted its price target to 35 from 37, maintaining a buy rating. Analysts expressed optimism about Hormel’s strategic initiatives, particularly efforts to improve operational efficiency and brand positioning in a competitive food industry.

🔻 Recent Downgrades

Not all analysts are bullish on Hormel, as some have taken a more cautious stance. 🔴 In February 2025, JPMorgan lowered its price target to 31 from 33 while maintaining a neutral rating. The firm cited concerns over margin pressures and increasing competition in the packaged food sector, which could limit earnings growth.

🔴 In December 2024, BNP Paribas Exane trimmed its price target to 27 from 28, reflecting uncertainty about Hormel’s ability to drive revenue growth in a challenging economic environment. Analysts pointed to softer consumer demand and pricing pressures as potential headwinds.

🎯 Consensus Price Target

📌 The current consensus 12-month price target for Hormel Foods stands at 31.80, suggesting a modest upside potential from its recent trading levels. Some analysts have set higher targets based on anticipated cost efficiencies and brand strength, while others remain cautious due to inflationary pressures and shifting consumer preferences.

The mixed analyst sentiment highlights the balance between the company’s long-standing dividend stability and the challenges it faces in adapting to evolving market conditions. Investors will be watching upcoming earnings and management’s ability to navigate industry headwinds before making further judgments on the stock’s outlook.

Earnings Report Summary

Hormel Foods, the company behind household staples like Spam and Jennie-O, just released its latest earnings report, and the results were a bit of a mixed bag. On one hand, the company managed to bring in $2.99 billion in sales, which was slightly better than what analysts had predicted. But on the other hand, profits took a hit.

Net income dropped to $170.6 million, or 31 cents per share, compared to $218.7 million, or 40 cents per share, in the same quarter last year. After adjusting for certain one-time factors, earnings came in at 35 cents per share, which was a little disappointing since analysts were expecting 38 cents.

The CEO, Jim Snee, pointed out that strong demand for Hormel’s core brands helped keep sales afloat. However, the company faced some tough headwinds. A major supply chain issue at a Planters facility in Virginia caused disruptions, and whole-bird turkey prices have been on the decline, which didn’t do any favors for the Jennie-O turkey business.

Because of these challenges, Hormel decided to tweak its outlook for the rest of the year. The company now expects earnings per share between $1.49 and $1.63, slightly lower than its previous forecast. A big part of this adjustment is tied to the sale of a non-core sow operation that impacted overall profitability. However, when looking at adjusted earnings, the company is still holding onto its forecast of $1.58 to $1.72 per share.

Looking ahead, Hormel is betting on its Transform & Modernize initiative, a cost-cutting effort expected to save somewhere between $100 million and $150 million. Meanwhile, total revenue for the year is projected to land between $11.9 billion and $12.2 billion, with organic sales growth of 1 to 3 percent.

Despite these efforts, Hormel’s stock hasn’t been a big winner lately. Over the last year, shares are down about 7 percent, while the S&P 500 has surged over 17 percent.

So, while Hormel is holding steady in some areas, it’s clear that challenges like rising costs, supply chain hiccups, and market pressures are weighing on the company. Investors will be watching closely to see if these cost-saving measures and strategic adjustments help turn things around in the coming quarters.

Financial Health and Stability

Hormel has always been a financially conservative company, which is one of the reasons it’s been able to pay and grow its dividend for so long.

The debt-to-equity ratio is 35.5%, which is relatively low compared to many companies in the food industry. A current ratio of 2.45 also suggests strong short-term liquidity, meaning the company isn’t struggling to cover its immediate financial obligations.

That said, profitability is weaker than it used to be. Return on equity is down to 9.52%, and operating margins have compressed due to rising costs and weaker consumer demand. The business isn’t in financial distress, but it’s something to monitor.

Valuation and Stock Performance

Hormel’s stock hasn’t been a great performer lately. It’s trading near its 52-week low of $27.59, far off its high of $36.86. That kind of price weakness isn’t unusual for a defensive stock, but it does make some investors question whether it’s worth holding.

Looking at valuation, the forward P/E ratio is 19.3, which is slightly below its historical average but still not particularly cheap. The PEG ratio of 3.10 suggests that the stock is expensive compared to its expected growth rate.

From a price-to-sales perspective, Hormel trades at 1.38, which is reasonable for a company in the consumer staples sector. The price-to-book ratio is 2.05, which is fair given its stable nature.

For long-term investors, the current price might offer an entry point for those looking to collect dividends. However, without a clear catalyst for growth, the stock could remain sluggish.

Risks and Considerations

Every investment comes with risks, and while Hormel is a relatively low-risk stock, there are still things to be aware of:

1️⃣ Margin Pressure – Rising ingredient and production costs are eating into profitability. If these costs stay high, it could hurt earnings.
2️⃣ Slowing Growth – Revenue and earnings have stagnated, making it harder to justify future dividend increases.
3️⃣ High Payout Ratio – With an 82% payout ratio, there’s not much room for error. If earnings continue to slide, dividend growth could be minimal.
4️⃣ Changing Consumer Preferences – Consumers are shifting towards fresher, healthier food options. If Hormel doesn’t adapt, some of its legacy brands could struggle.
5️⃣ Stock Underperformance – With the stock price lagging, it might take a while before investors see capital appreciation.

Final Thoughts

Hormel has long been a go-to stock for dividend investors, and for good reason. The 3.87% yield is attractive, and with 58 years of consecutive increases, it’s one of the safest dividend payers out there.

That said, growth challenges and a high payout ratio could limit how much the dividend increases in the future. While the company isn’t in any immediate trouble, its profitability is under pressure, and the stock has struggled.

For those focused on stable income, Hormel still delivers. But for investors looking for strong stock price appreciation or fast dividend growth, it may not be the most exciting option right now.