Stock Watch
Hershey Foods: Sweet Retreat
Investors can take refuge from stock-market stress with this steadily growing confectioner that pays a tempting dividend.
May 6, 2003
Wall Street watchers are starting to spread the scary news: Buy stocks now or you'll miss out on big returns when the market turns around. But after the beating so many investors suffered over the past three years, that takes a strong stomach. Fortunately, there's Hershey Foods (HSY), which offers a sweet combination of growth and income, for investors who want to play it safe.
Hershey, founded in 1894 and still doing business in its namesake Pennsylvania town, is the biggest candymaker in the U.S., with a 30% market share. Its confections are well-known among chocoholics and nonchocoholics alike, and include Reese's Peanut Butter Cups, Fifth Avenue candy bars, York Peppermint Patties, Heath Bars, Jolly Ranchers, Twizzlers, and of course, the celebrated Hershey's Kiss.
The stock is recommended by conservative broker Edward Jones, a firm that emphasizes less risky, dividend-paying investments. (It primarily underwrites bond issues.) Jones analysts, who won't look at a company unless it's been in business for at least ten years, like Hershey for its market dominance and for its record of consistent sales and earnings growth.
The trend is likely to continue. Analysts expect 10% annual profit growth, on average, over the next three to five years. Plus, Hershey pays a tempting $1.31 per share annual dividend.
The risks: If prices on such essential commodities as sugar or cocoa take a sharp turn upward, production costs could eat into profits. And then there's the whole healthier-eating campaign that's spelled trouble (and lawsuits) for high-profile junk food purveyors, including McDonald's and Kentucky Fried Chicken.
But how much damage can a little chocolate Kiss do?
-- Elizabeth Frengel
