Monday, November 23, 2015

Recent Purchase (Tax Deferred) - HSY



For my tax-deferred portfolio, I bought 20 shares of Hershey (HSY). Hershey has been on my watchlist forever since I really like it’s business model. I expect this company to be around for decades to come - which is perfect for my 401k account.


Details of transaction:


Action
Security
Price
Quantity
Amount
Buy
HSY
$85.10
20
$1702.2 +fees


The yield is close to 2.72% which increases my forward yearly dividends by $46.60.

My plan for the 401k self directed account is just to let my investments sit there for a long time. I am leaning towards stable companies with a long history of dividend growth, stability and ability to grow earnings.


About  Hershey Foods (HSY)


You can read more about HSY here:
http://www.wikinvest.com/stock/Hershey_Foods_(HSY)


The drop in the recent price is due to the underperformance with sales/profits from Golden Monkey which was acquired in 2014. For me, the drop in price is an opportunity to buy since the overall fundamentals are very good.


Criteria Table


HSY 11/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
6 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
Yes
Yes
FCF covers Dividends
M* Moat
Wide Moat
Yes
Wide
M* & S&P
Credit Rating
> BBB+
Yes
A+
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes, but High Debt to Equity
Cash to Debt 0.12
Interest Coverage 15.86
Debt to Equity 295.43
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 3 Stars
Payout Ratio
<60%
Yes
56%
Dividend Growth
& Yield
Dividend Yield
>3%
No
2.72%
Dividend Growth
>5%
Yes
11.70%
Chowder
>8%
Yes
14.42%
Valuation
Yield/Avg Yield
>1.1
Yes
1.22
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 96.62
Low Point 71
P/E
Below Mid Point
No, but Yes for Forward P/E
Median 24.73 Current 37.85 Forward 19.38
DRRM
~10%
No - Close
Assuming 7.5% growth; projected return=9.64%
M* Estimate
<M* est
Yes
M* 102
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 93


Note: Data from Gurufocus, Google Finance, Yahoo Finance, M*


Fair Price Calculation


I use the dividend yield theory, PE analysis and DDRM for fair price calculation. Based on these methods, I estimate the fair price to be around $95. Therefore, I believe HSY is trading close to or just below fair value.

Yield Theory

I actually want to buy more HSY - let’s see how the markets unfold in the next few weeks.


That's it for now! What do you think of HSY?
D4s

8 comments:

  1. Great purchase D4S. Awesome company. I'm happy for your purchase as this is a solid "Core" stock. Would love to pick some shares up as well. Great price. Thanks for sharing and let's keep up the great work my friend. Cheers.

    ReplyDelete
    Replies
    1. Div Hustler,
      Thanks for your comments. Actually, I wanted to buy more, but I messed up with my broker. Live and learn. Anyway, let's see how this markets will go. I look forward to add more if possible.
      D4s

      Delete
  2. Nice buy. I had HSY at about $95 as well and I had a target of $85 for a nice 5% pull back. I believe you got a good entry price.

    ReplyDelete
    Replies
    1. Thanks Chimp. I like HSYs business model. They just need to sell chocolates. If they need to grow the earnings, they just need to increase prices (up to a certain extent). I am happy with the entry price and I look forward to adding more soon.
      D4s

      Delete
  3. Solid company and very consistent. Growth over the past 5 years has been really solid while maintaining the 50% payout ratio. Thats the way to do it! Congrats on the buy!

    ReplyDelete
    Replies
    1. Thanks Adam for visiting and your kind words. The goal is to load up on these great companies when they are on sale. lets see if I can add more soon.
      D4s

      Delete
  4. Nice purchase. I was trying hard to find some cash to add shares when it was around $83-84 but couldn't find any which was painful. Great company and there's lots of room for this one to keep running. No doubt they'll still be selling chocolate 30 years from now and paying higher dividends too!

    ReplyDelete
    Replies
    1. PIP, thanks for your comments. I love this type of business - no constant innovation - product that sells itself etc. I will add more if the price dips further.
      D4s

      Delete