HSY - Hershey: 2.8% Yield Indicates Undervaluation But Graham P/E Shows Otherwise

2024-06-03 11:37:58 ET

Summary

• The Hershey Company's dividend yield has surged to almost 2.8%, among the highest levels in at least 10 years.
• And the company's dividends are safe, too. But limited growth potential is expected due to high payout ratios, increased debt levels, and profit headwinds.
• Its current P/E is close to the Graham P/E and does not properly price in the above risks in my view.

HSY stock: yield surged to the highest levels in 10 years

The Hershey Company ( HSY ) showed up in our screening recently. In these screens, we set filters to look for companies that pay regular dividends and whose current dividend yields are usually below or above their historical averages. A simple glance at the chart below will show why HSY is near the top of our filtered results. HSY is currently yielding almost 2.8% on an FWD basis (shown by the solid red line). In contrast, its historical average yield (represented by the gray dotted line) is only about 2.15%. The current yield does exceed the average substantially and surpasses the 1+ standard deviation level (represented by the orange line with symbols) as seen....

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