The latest stock performance of High Tech Giants like Apple, Alphabet, Microsoft and Facebook showed quite clearly a Polarization in the market.

High Tech Boom leaves behind some unloved companies and sectors

Long before the COVID-10 Pandemic, Digitalisation has been an overwhelmingly dominant secular trend that spread accross our society and all sectors and industries. And the Coronavirus with lock-downs all around the world gave these Tech giants like Amazon, Alibaba etc. just an awefully massive boost.

Big Tech belongs to the long term winners, there is no doubt about that.

On the other hand, the sector rotation resp. huge capital inflows into High Tech left some sectors and specific companies far behind the stock market recovery we have seen since the end of March 2020.

There is a nice window of opportunity for Dividend Growth Investors, to identify stocks with a long history of increasing shareholder payouts and resilience in the current highly dynamic environment.

While Oil companies and cyclical businesses in general are facing fundamental challenges and uncertainties, there are some kind of “hidden stock gems” in the market that show a nice risk-reward profile.

Conservative Dividend Growth Investors looking to establish an ever growing passive income stream want to look at Stocks that are rewarding long term oriented Shareholders for doing nothing. Just putting the increasing dividends to work by reinvesting into the investment portfolio again and again. That’s the Magic of the Compound Effect and how to use the Domino Effect when investing.

J.M. Smucker’s an underappreciated high quality business

While the company is not such a household name in Europe, J.M. Smucker products can be found in over 90 % of US households.

Just have a look at the company’s website: www.smuckers.com showing an interesting product range including

• coffee brands like Folgers, DUNKIN, Café Bustello,
• snacks like Jif peanut butter, Sahale, J.M. Smucker’s Uncrustables and
• pet food brands Milk Bone, Natures Recipe, Meow Mix.

Despite its compellingly diversified product portfolio (the largest segment is pet food) J.M. Smucker (NYSE SJM) is much smaller than Nestlé, Unilever or Danone for instance. It also does not get the same coverage .

It’s small and beautiful I’d say. J.M. Smucker is a business with a long history, in fact it has been able to grow over the last 100 years at an astonishing rate. As the company reports show, J.M. Smucker on average consistently increased earnings and dividends annually by a high single digit year after year.

The company stock has moved in a range of USD 100 to 125 (I acquired some shares in 2016) in the past years, down quite remarkably from its high of USD 150 in 2015.

Let’s be clear, J.M. Smucker is facing its specific challenges and massive competition from retailers with their own branded goods such as Walmart and Aldi.

And of course it it still digesting some relatively large acquisitions in the pet food sector (Big Heart Pet Brands) which left the balance sheet a bit stretched.

I am no fan of debt-fueled “external” growth.

But the deleveraging process is on track and what the stock price does not really reflect: J.M. Smucker has continued growing earnings per share and increased dividends.

Granted, it has been a bumpy road sometimes, there clearly have been some disappointing quarters where J.M. Smucker either missed on the top- and/or the bottom line.

But the fundamental business trend is satisfying and attractive.

With a 12x to 15x earnings valuation and a healthy dividend payout ratio leaving room to further reduce debt while investing into the business, you get a stake in an enviable brand portfolio churning out a steadily growing cash flow stream.

J.M. Smucker really looks like a compelling company Dividend Growth Investors should definitively have an eye on.

What’s your take on J.M. Smucker? Are you already a shareholder or do you have it on your watchlist?

Thanks for sharing your thoughts below in the commentary section.

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action