The Board of Directors of The Hershey Company (NYSE: HSY) today declared a quarterly dividend of $0.2975 on the Common Stock, an increase of 10.2 percent, or $0.0275 per share. In addition, the Board declared a dividend of $0.2678 on the Class B Common Stock, an increase of 10.4 percent, or $0.0253 per share. The dividends are payable September 14, 2007, to stockholders of record August 24, 2007.
“The Company continues to generate steady free cash flow and has a strong balance sheet. This dividend increase reflects our confidence in Hershey’s marketplace position and long-term growth potential,” said Richard H. Lenny, Chairman, President, and Chief Executive Officer.
This increase brings Hershey’s Dividend Yield to 2.50% and with a Beta of 0.50, Hershey could be a great defensive play in these choppy market conditions.
Hershey has now tripled its dividend over the past ten years as well as completing two 2:1 stock splits!
Hershey may deploy its excess cash well by acquiring Godiva premium chocolates from Campbell. Hershey has recent experience in the premium chocolate category with its Cacao Reserve line of chocolates. In August of 2005, Hershey’s purchased Scharffen Bergen chocolates and Joseph Schmidt chocolates for $47 million. The combined companies had sales of $25 million at the time.
Premium chocolate appears to be a high growth area in the confectionary industry and Hershey could take a near strangle hold on that market segment if it purchases Godiva.
Godiva has only 275 stores in the United States, but a significant investment by Hershey would likely push that number higher as the premium chocolate market expands.
Currently, Godiva is a high priced-low volume brand that doesn’t necessarily mix well with what Hershey’s traditional strengths have been. In addition, when Hershey acquires another company it usually does so at very reasonable prices. Even if it doesn’t “fit their strategy” it is highly unlikely that Campbell’s will let go of Godiva for a song.
Regardless of Hershey’s future, investors can rely on the candy company for steady rising dividends and a relatively stable stock during turbulent markets. This make Hershey an attractive stock for those of you looking to deploy some capital right now.
Disclosure: I do not own Hershey stock.