The J.M. Smucker Company (www.smuckers.com) was founded in 1897
when the Company's namesake and founder sold his first product --
apple butter -- from the back of a horse-drawn wagon. Today, over
a century later, the Company is the market leader in fruit
spreads, peanut butter, shortening and oils, ice cream toppings,
and health and natural foods beverages in North America under
such icon brands as Smucker's, Jif and Crisco. For over 100
years, The J.M. Smucker Company has been headquartered in
Orrville, Ohio, and has been family run for four generations. The
J.M. Smucker Company has over 2,700 employees worldwide and
distributes products in more than 45 countries.
[Source: Company Press Release]
Reasons to Invest:
Has your mother ever told you that it's not wise to go grocery
shopping when you're hungry? Maybe that same theory holds true
when you are looking for investment worthy candidates to add to
your portfolio. Case and point being, this week's Drip of the
Week is the J. M. Smucker Company (NYSE:SJM).
Nonetheless, whether I prefer strawberry jam on toast, or grape
jelly on my PB and J, my appetite for a DRIP like this has been
growing larger with each passing month. The funny thing is that
I was just perusing through some charts when I came across SJM.
The chart looked so phenomenal that I was worried that it was
going to be an all chart but no play type of situation (I'm sure
you can relate). However, the news surrounding Smucker's, as
well as the company's financial strength told the same story.
For the first time in a long time, the news and numbers around a
stock matched what my technical indicators were telling me.
Over the second and third quarter of 2003, sales rose 15% to
$736.3M. Net income increased by a margin of 28 % to $57.9
million. The company reported that the increase in sales
reflected an increase in "Jif" and "Cisco" brands, improved
margins and lowered interest expenses.
According to SJM's income statements, their revenue growth is at
an impressive 90.9%, with a gross profit of 456.09M. If that
isn't impressive enough, how about earnings that grew at 212.30
percent, with a diluted EPS of 2.176. Their profitability margin
is at 7.76 percent.
Smucker's has a market cap of 2.32 billion and have a trailing
P/E of 21.34. Their 52-week change is 15.71 %, which is not
necessarily that impressive, but nonetheless it has tacked on ten
points over the past year. Ten points is not that bad, when you
consider that the stock is trading at an average volume of 133K.
On top of this statistical information, headlines surrounding SJM
have been very upbeat. On January 30th, 2004 SJM declared a
$0.23 per share dividend on the common shares outstanding. The
payable date for the dividend is to be held on March 1, 2004, to
shareholders on record as of February 17th. This means you have
roughly two weeks to consider new positions on this DRIP, and if
you so choose to go forth with investing capital into SJM, you
could be liable for this dividend. SJM currently yields a 1.98
percent dividend, which comes out to $.92 per year.
Merrill Lynch initiated a "buy" rating on SJM on January 9th,
2004, further showing the anticipated strength in the stock.
At the end of December, The J. M. Smucker Company was named as
the best company to work for, according to FORTUNE magazine's
seventh annual survey. Smucker's has been on the list for the
past seven years, but 2003 was the first year that labeled the
company at the top of this prestigious list. I would speculate
that if the company knows how to keep its employee's happy, they
know how to keep their customers happy, which can only be good
Legg Mason has given SJM a five star rating (five stars are the
best you can get) on November 24th.
As far as growth rates go, SJM has a one-year dividend percentage
growth rate of 29.69, and a 3-year dividend percentage growth
rate of 10.81 percent. The company sees earnings per share
growing 53.62 percent over the next year, 30.19 percent over the
next 3-years and 10.24 percent over the next five years. Sales
growth rates are predicted to be 90.90 percent over the next
year, 26.90 percent over the next 3-years and 18.33 percent over
the next 5-years.
From a technical standpoint SJM is a solid candidate for any
portfolio. The stock has been rising through its February 2003
regression channel with ease.
The 10-DMA is currently resting more than half a point over the
20-DMA which is usually a sign of a bullish activity. Generally
speaking, when the 10-DMA is over the 20-DMA bullish trends can
be found on the chart. When the 20 is over the 10, the stock is
usually on a bearish trend.
A little convergence is taking place on the MACD indicator, but
that's to be expected when one considers that the stock is so
overextended and that profit taking has been overdue. In fact, I
would wait for a dip back to the 50-DMA (45.72 as of Market Close
02/03/04) before opening any new DRIP positions on SJM.
Moreover, the company just hit a new all-time high (47.56) on
January 28th, 2004. Every time the stock hits a new 52-week
high, selling follows. The selling generally lasts a week or two
and then the stock finds grounding and bounces higher. Keeping
this in mind, our entry point of 45.72 is very likely to happen
in the next few sessions.
This ends another exciting episode of the DripAdvisor.com Drip of
the Week. Stay tuned next week, as we will spotlight another
stock worthy of the DripAdvisor.com limelight.
Until Next Week,
Strong Buy 2
Strong Sell 0
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