Hormel Foods: Is it Time to Buy, Sell, or Hold? A Comprehensive Analysis

Persistent struggles

No company avoids adversity forever. However, Hormel has been dealt an unusually tough hand repeatedly over the past decade.

All of these events disrupted Hormel's core commodity markets and supply chains, impacting its sales volumes. The financial hit was noticeable, and higher-than-usual inflation over the past three years has further increased its costs.

• Gross profit margins have slipped significantly from 2017 levels, and earnings per share have declined to levels last seen in 2016.

These issues aren't Hormel's fault, but it's clear that the company hasn't been able to offset these challenges. The business has deteriorated.

Is the dividend safe?

• Investors shouldn't fear a cut at this point, though. Hormel's dividend-raising reputation is in its DNA, and it would take an existential crisis to force a cut. I don't think the company is in such dire straits.

So what's the final verdict?

• I believe Hormel's anticipated cost savings will boost cash flow and decrease its dividend payout ratio. Additionally, investors are getting a hefty 3.3% dividend yield with a 58-year track record of growth while they wait for the business to rebound.

But with the share price a tad higher than it was months ago, there's not as much margin of safety in the stock today. To me, that makes Hormel a hold.