In a recent announcement, Campbell Soup Co (NYSE: CPB) revealed that they will be paying a dividend of $0.37 per share on October 30, 2023, with an ex-dividend date set for October 4, 2023. As investors eagerly anticipate this upcoming payment, it is important to take a closer look at the company’s dividend history, yield, and growth rates to assess its sustainability.
Campbell Soup Co, with a history spanning nearly 150 years, is a leading manufacturer and marketer of branded convenience food products, most notably soup. The company’s portfolio includes popular brands like Campbell’s, Pace, Prego, Swanson, V8, and Pepperidge Farm. After selling its international snacking operations in 2019, the majority of Campbell Soup Co’s sales now come from the United States. Over the years, the company has made strategic acquisitions to redefine its product mix, such as the merger with Snyder’s-Lance in 2018, which expanded its presence in the growing snack food aisle.
Campbell Soup Co has a consistent track record of dividend payments since 1986. Currently, dividends are distributed on a quarterly basis. The company has been increasing its dividend each year since 2013, making it a dividend achiever, a distinction given to companies that raise their dividend for at least 10 consecutive years. Looking at the historical trends, Campbell Soup Co’s annual Dividends Per Share can be tracked with the provided chart.
With a 12-month trailing dividend yield of 3.74% and a 12-month forward dividend yield of 3.74%, Campbell Soup Co is expected to maintain the same level of dividend payments over the next 12 months. Over the past three years, the annual dividend growth rate for the company was 1.90%, which decreased to 1.40% over a five-year horizon. However, the annual dividends per share growth rate for the past decade stands at a higher rate of 5.70%. Considering the dividend yield and five-year growth rate, the 5-year yield on cost of Campbell Soup Co’s stock is approximately 4.01%.
Assessing the sustainability of the dividend requires evaluating the company’s payout ratio. Campbell Soup Co’s dividend payout ratio, as of July 31, 2023, is 0.52. A lower ratio indicates that the company retains a significant portion of earnings, allowing for future growth and financial resilience. In terms of profitability, Campbell Soup Co ranks 8 out of 10, indicating positive prospects. The company has consistently reported positive net income over the past decade, solidifying its high profitability.
For dividends to be sustainable, a company must demonstrate strong growth metrics. Campbell Soup Co’s growth rank of 8 out of 10 indicates a positive growth trajectory compared to competitors. Revenue per share and the 3-year revenue growth rate suggest a robust revenue model, although the growth rate of approximately 2.80% per year underperforms compared to global competitors. The company’s 3-year EPS growth rate, indicating earnings growth, has averaged around 13.50% per year, underperforming compared to approximately 43.12% of global competitors. Additionally, Campbell Soup Co’s 5-year EBITDA growth rate of 8.30% underperforms compared to approximately 44.33% of global competitors.
In conclusion, Campbell Soup Co has a commendable history of consistent dividend payments and growth. The reasonable payout ratio and high profitability rank are positive indicators of sustainability. However, the company’s growth metrics, particularly the EPS and EBITDA growth rates, suggest potential challenges ahead. Investors should closely monitor these factors while considering the dividend performance of Campbell Soup Co.
Definitions:
– Dividend Achiever: Companies that have increased their dividend each year for at least 10 consecutive years.
– Dividend Payout Ratio: The percentage of earnings that a company distributes as dividends.
– Revenue: The income generated by a company from its core operations.
– EPS (Earnings Per Share): The portion of a company’s profit allocated to each outstanding share of common stock.
– EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company’s operating performance, excluding interest, taxes, depreciation, and amortization expenses.
Source: GuruFocus