McCormick & Company Inc (MKC) is the world's largest spice company, with operations in the manufacture, marketing and distribution of spices, seasonings, flavorings and other specialty food products. The company markets its products to retail food, foodservice and industrial markets under the McCormick and Schilling brand names. Risk Parameter Calculation Here I use the corporation’s financial health to assign a risk number for measuring risk-to-dividends. The risk number for risk-to-dividends is 1.9. This is a medium risk category as per my 3-point risk scale. The negative EPS growth and historically high payout factor makes in medium risk to dividend. Quality of Dividends This section measures the dividend growth rate, duration of growth, consistency over a period of past five years. Fair Value Calculation This section determines what price I should pay to buy a given stock The range of fair value is calculated as $23.9 to $27.9. Qualitative Analysis MKC is a founded in 1889 and is worlds largest spice company. Its growth model consists of growing by acquisition, focusing on higher-margin products, and cost reducing efforts. Conclusion MKC is a slow growing company. I expect MKC to continue to have a sustainable cash flow and dividend growth over next few years. I like its geographical diversification and strong brand in spice consumer market. MKC is trading at $37.7 which is approximately 35% higher than what I would be willing to pay. I would be open to add MKC when in my buy range. Full Disclosure: No positions at the time of writing.
MKC is member of Mergent’s Broad Dividend Achiever Index and S&P500 Index. The most recent dividend increase was in December 2009.
Trend Analysis Here I am looking at trends for past 9 years of company’s revenue and profitability. These parameters should show consistently growth trends. The trend charts is shown in image below.
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