This Alternative to Buying Farmland Could Turn Into a High Dividend Stock.

Jim Rogers and others have been recommending agriculture as an investment.

That got me thinking about high dividend stocks in the agricultural sector.  Guess what?  There are none.  But I did find ConAgra (CAG).  The company has been in business for more than 90 years.  It is a diversified player in the packaged food industry. The majority of its sales are derived from North America. Its portfolio includes such well-known brands as Act II, Banquet, Chef Boyardee, Healthy Choice, Orville Redenbacher’s, Parkay, and Reddi-wip. Beyond grocery retailers, ConAgra also sells to restaurants and other food service establishments. With its Lamb Weston brand, the firm is the largest supplier of french fries in the U.S.

ConAgra is cheap at $23.19, but you will be able to buy it at a deep discount when the “double-dip recession” panics stock market investors.  Wait for the bottom in the $12 – $15 per share range.

ConAgra (CAG)

Market price: $23.19

Shares: 410.80 M

Market capitalization: $9,526,452,000


Dividend record: ConAgra started paying a 3 cent quarterly dividend in 1987.  The company grew its dividend from 1987 (34 cents) to 2006 (27.25 cents).  Then they missed a quarter in April 2006 (2Q2006).  They resumed paying a dividend in 3Q2006, but the dividend was cut to 18 cents quarterly.  Since then they have paid a quarterly dividend to today’s 23 cents quarterly dividend.

Dividend: $0.23 quarterly

Dividend yield: 3.9% ($0.23 dividend x 4/$23.19)

Recent EPS: $1.90

Dividend payout ratio: 48.4% ($0.92 annual dividend/$1.90 recent EPS)

ConAgra would be a 6% high dividend stock if its price dropped to $15.33 per share.  CAG traded in this range as recent as April 2009.

Earning power: $2.05 EPS @ 410.8 million shares

(earnings adjusted for changes in capitalization.  ConAgra has been buying back shares)

EPS             Net inc.        Adj EPS

2007   $1.51            $765 M         $1.86

2008   $1.90            $931 M         $2.27

2009   $2.15            $978 M         $2.38

2010   $1.62            $726 M         $1.77

2011   $1.88            $817 M         $1.99

Five year average adjust earnings per share: $2.05

Consider buying below $24.65 (12 times avg. adjusted earnings)

Consider selling above $41.00 (20 times avg. adjusted earnings)

ConAgra is trading at 11.3 times average earnings this is value territory.

Balance sheet: Unexciting.  Stagnant since 2007 (assets and liabilities have declined with equity remaining the same)


Book value per share: $10.83

Price to book value: 2.14 this is good ($23.19/$10.83)

Current ratio: 1.83 (over 2.0 is good)

Quick ratio: 0.86 (over 1.0 is good)

Disclosure: I don’t own ConAgra (CAG)

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Published in: on August 15, 2011 at 1:37 pm  Leave a Comment  

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