Call Us Toll Free: 1-800-388-9993

ConAgra Brands Inc. (CAG)

 

Click to Order DRIP

 

Incorporated on December 5, 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 constant dividends 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 $17.6 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, revenues and earnings growth.


It is a diversified business with a durable competitive advantage over its rivals, which enjoys a solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $2.51 per share this year, up from $2.28 per share last year, and to go to about $2.59 per share next year. Conagra has paid dividends to investors since 1976, and during the past twenty years, it has increased its dividends at an annualized average rate of 15.0%, with its quarterly payment of $0.275 currently providing a yield of 2.54%.


The value of dividends reinvestment: A hypothetical investment in Conagra has grown cumulatively (including dividends reinvested) 9,888.36% during the past forty years. The same investment has grown only 3,508.38% in the same period of time, excluding dividends. During the same period of time, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Admiral Fund (VFIAX) has grown cumulatively 6,799.92%, including dividends reinvested. According to the data and calculations of the financial website dqydj.com (don’t quit your day job), a periodic monthly investment of $100 in CAG for the past forty years would has grown to $1,077,582, including dividends reinvested. The company still has room for significant dividend payments and dividend increases in the coming years, since its current Dividend Payout Ratio (DPR), which is its dividend payments as a percentage of its earnings, is just 41.9%.


Its current Price to Earnings ratio (P/E --a measure of valuation) of 17.7 is 31.3% below the US Market Index. The forward P/E ratio is 14.3. Its Price to Book ratio of 2.16 is 36.3% below the index. Its Price to Sales ratio (P/Sales) of 1.55 is 35.4% below the US Market index, and its Price to Cash Flow of 9.15 is 37.2% below the index. Technically (from the chart’s perspective) CAG also looks attractive, trading 12.2% below its all-time high), while it is forming a long price consolidation pattern between $39 and $34 approximately, in which $34 is acting as a technical support level.


The actively managed mutual funds American Funds Washington Mutual and American Funds Fundamental Investor are major shareholders of CAG, holding 3.8% and 3.7% 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). Conagra’s main competitors in the world are General Mills Inc. (GIS) and Nestle SA (NESN). Its 5-year 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 0.86, so the stock is 14% less volatile than the Market.


Best and worst years during the past 40 years: Its best year was 1980, in which CAG returned, excluding dividends, 163.8%. On the flip side, its worst year was 2018, when the stock declined 43.3%, excluding dividends. CAG’s Dividend Reinvestment Plan charges no fees for cash investing, dividend reinvestment, safekeeping or automatic investment. With the stock being fundamental and technically attractive, this company might be 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. Past results and risks illustrated in the article are for reference and educational purpose only and do not guarantee future performance.