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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *ConAgra Brands Inc. (CAG)

ComparisonCAG (recently recommended stock of the month) vs SP500 (by Vanguard SP500 Index Fund) in the last 10 years.

Company Information:

Incorporated on December 5th, 1975, Conagra Brands, Inc. operates through two segments: Consumer Foods and Commercial Foods. The Company sells branded and customized food products, as well as commercially branded foods. It also supplies vegetable, spice and grain products to a range of restaurants, foodservice operators and commercial customers. Conagra Foodservice offers products to restaurants, retailers, commercial customers, and other foodservice suppliers. Its brands include Marie Callender's, Healthy Choice, Slim Jim, Hebrew National, Orville Redenbacher's, Peter Pan, Reddi-Wip, PAM, Snack Pack, Banquet, Chef Boyardee, Egg Beaters, Rosarita, Fleischmann's and Hunt's. CAG is considered a defensive stock, because it provides a constant dividend and stable earnings, regardless of the state of the overall stock market, because of the constant demand for its products. As a defensive stock, it tends to remain stable during the various phases of the business cycle and tends to perform better than the broader market during recessions. Its current total market capitalization of $13.3 billion makes CAG a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) with a long history of consistent dividend payments and revenues and earnings growth.

 

It is considered a diversified business with a durable competitive advantage over its rivals that enjoys solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $2.05 per share this year, and to go to about $2.17 per share next year. The company has paid dividends to investors since 1976, and during the past thirty years has increased the dividends from 4 cents per share quarterly in the year 1989, to 21 cents per share quarterly today. Its current trailing 12-month dividend yield is 3.21%

 

The value of dividends reinvestment: A hypothetical investment in Conagra Brands Inc. has grown cumulatively (including dividends reinvested) 14,164.69% during the past forty years. The same investment has grown only 5,179.32% in the same period of time, excluding dividends. During the same period, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Admiral (VFIAX) has grown cumulatively (including dividends reinvested) 7,632.48%. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 46.0%, which means the company is paying out 46.0% of all its net income in dividends and is retaining a large percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is 57.0%. Its current Price to Earnings ratio (P/E --a measure of valuation) of 18.6 is 2.9% below the S&P 500® index. Its Price to Sales ratio (P/Sales) of 1.3 is 35.3% below the index, and its Price to Book ratio of 1.8 is 38.5% below the index. According to Morningstar, the stock is trading 21% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon.

 

Technically (from the chart’s perspective) CAG also looks attractive, after clearing a three-month price consolidation pattern with above-average volume. Despite the price breakout, the stock is still trading 30.8% below its 52 weeks high. The actively managed no-load mutual funds T. Rowe Price Value and T. Rowe Price Mid-Cap Growth are major shareholders of CAG, holding 1.07% and 1.03% of its shares respectively. The stock is also one of the 63 holdings of the mutual fund managed by Moneypaper Advisors, the MP 63 Fund (DRIPX). CAG’s main competitors in the world are Nestle SA (NESN) and General Mills Inc. (GIS)

 

Best and worst years during the past 40 years: Its best year was 1980, in which CAG returned, excluding dividends, 163.77%. On the flip side, its worst year was 2018, when the stock declined 43.30% excluding dividends. CAG’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 company is an appropriate holding for investors who wish to build a holding over the long term.

 

Disclosure: Mario Medina has no position in Conagra Brands Inc. (CAG) and has no plans to initiate any position in the immediate future. However, the author is the co-manager of the MP 63 Fund (DRIPX), which does hold a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with CAG 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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