Is Hershey a Good Dividend Stock to Buy?


Hershey (NYSE:HSY) is one of the most recognizable consumer brands in the United States. The company is virtually synonymous with candy, making it a longtime favorite of investors looking for buy-and-hold assets.

Hershey is also widely held as a dividend stock, not least because its business model facilitates the return of large hoards of cash to its shareholders. But is Hershey a good dividend stock to buy now?

Each share of Hershey currently pays $4.14 for a yield of 1.69 percent.

Hershey has raised its dividend at a fairly rapid pace in recent years. The 3-year compounded annual growth rate for the payout is over 9 percent. Hershey’s payout ratio is 52 percent, which is reasonably safe for a business that seems to be intent on passing more cash to its shareholders.

Investors should note, though, that Hershey’s dividend growth rate is expected to slow in the near future. Analysts project the 3-year forward CAGR for Hershey’s dividend payouts to be 4 percent. While still a reasonable dividend growth rate, this represents a significant slowdown compared to the last three years.

Hershey has a 13-year track record of dividend increases. Combined with its longstanding dominance within its industry and safe payout ratio, this makes Hershey reasonably attractive for investors seeking stable, long-term income from their portfolios.

One drawback to Hershey as a dividend stock, however, is its low yield. Throughout much of the 2010s, Hershey shares yielded over 2 percent. The lower yield is a function of steadily increasing share prices, but investors who buy today will have to pay considerably more for their dividends.

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