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Friday, 02/06/2004

Smucker Up!
By Nich Sheldon
SJM - J. M. Smucker Company

Company Description

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 for business.

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,
Nich Sheldon
Editor

Broker Recommendations

Strong Buy         2
Buy                4
Hold               4
Sell               0
Strong Sell        0

Brokers Covering  10


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $15,000/Month


Reinvestment Fees - 
Dividend investment fees: 0
Cash investment fees: 0
Auto reinvestment fees: N/A


Transfer Agent:
ComputerShare Investor Svcs.
800-942-5909


Corporate Headquarters:
One Strawberry Lane
Orrville, OH 44667
Phone: (330) 682-3000
Fax: (330) 684-3026



 
 

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