​How Hershey Compounds Sweet Returns

MoneyShow  |


Founded in 1894 in Hershey, Pennsylvania, The Hershey Company (HSY) is offering tasty chocolates and candies but is rewarding its shareholders with a 2.4% dividend yield, while raising its dividend eight consecutive years, notes Ned Piplovic, editor of DividendInvestor.

The traditional American confectioner manufactures and sells confectionery products; the company provides its products primarily under the Hershey’s, Reese’s, Kisses, Almond Joy, Brookside, Cadbury, Good & Plenty, Kit Kat, Twizzler, Breathsavers, Bubble Yum and Heath brands, among others.

The Hershey Company operates an entertainment complex in Hershey that includes Hersheypark theme park, Hersheypark Stadium, Hersheypark Arena, Hershey Museum and the Giant Center arena.

The company’s current $0.656 quarterly dividend distribution converts to a $2.624 annual payout and yields 2.4%. This current yield is 8.4% above Hershey’s own 2.2% average yield over the past five years. Additionally, the company’s current yield excels in comparison to Hershey’s industry peers.

Compared to the $2.08 average yield of all the companies in the Confectioners Industry segment, Hershey’s current yield stands 14.6% higher. Hershey’s current yield is also 35.5% above the 1.76% average yield of the Consumer Products sector average yield.

The company has rewarded investors with eight consecutive years of dividend hikes. Over that period, the annual dividend amount rose at an average rate of 10.4%. The result of these dividend hikes is a 121% total annual dividend boost since 2009.

Over the extended period of 20 years, the company failed to raise the annual dividend payout only once. Compared to the last eight years, the dividend grew at a slightly slower pace of 9.3% per year over the last two decades. However, the result of compounding dividend hikes over such an extended period resulted in a six-fold surge of the total annual dividend amount.

The combined effect of the rising dividends and the strong asset appreciation rewarded the company’s shareholders with a 19.15% total return over the last 12 months, 26.25% over the three years and almost 75% over the last five years.

Ned Piplovic is editor of Dividend Investor.

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