5 Reasons To Buy JM Smucker

With new cases of the coronavirus spiking in the US and worldwide.

With the already historic unemployment levels and job losses in recent months.

With massive uncertainty in hospitals, banks, and other industries.

And with many Blue Chip stocks looking vulnerable when they’re supposed to be among the best areas to invest your capital.

There are few safe places to invest your capital today.  And this number is growing smaller every day this crisis lasts.

The key to continue compounding your investments and build wealth is to keep investing well over time.

Most people think the number one way to do that is to invest in assets that will grow your capital over time.

And this is huge part of things.

But another huge part of this is also losing as little capital as possible.

The fewer investment losses you have the more capital you keep.  And the more capital you keep the faster you can invest well to grow your wealth.

In recent articles I’ve shown you several stocks to avoid investing in…

Today, I want to show you something to consider buying in 5 Reasons To Buy JM Smucker.

JM Smucker (SJM) is a packaged food company that mainly operates in the US.

Its largest operating segment is pet foods and treats in some of the following brands…

  • Milk Bone
  • Meow Mix
  • 9Lives
  • Kibbles n Bits
  • Nature’s Recipe
  • Natural Balance
  • Rachael Ray Nutrish

And it also sells human consumable foods like Folgers Coffee, Jif Peanut Butter, Smuckers Jellies, Uncrustables, and various other products.

Based in Orrville Ohio, SJM is a $12.2 billion market cap company that pays a 3.4% dividend.

This is reason #1 to buy SJM to help Depression Proof Your Portfolio.

SJM’s 3.4% Dividend

Over the last decade SJM’s paid out a total of $25.80 per share in dividends.

At today’s share count of 113 million that’s equal to $335.4 million paid out to shareholders in the last decade.

Plus, the dividends increased in the last 10 years from $1.64 per share to $3.49 per share as of this writing.  This is a total increase of 113% or an average increase of 11.3% per year.

These dividend payments will help you earn cash if you take the money out.  Or by allowing you to buy more shares over time if you reinvest the dividends.

Both help you earn higher returns over time and will especially help during any prolonged economic issues like we’re dealing with today.

It can do this because it earns huge profits.  Which is reason #2 to buy SJM to Depression Proof Your Portfolio.

SJM’s Enormously Profitable

Over the last decade it earned an average operating income margin of 16.4% per year on average.

I look for anything above 10% on a consistent basis so SJM well surpasses this number.

Why 10%?

Because after evaluating thousands of companies over the last 13+ years of my career I estimate fewer than 5% of all companies in the world produce consistent operating profit margins above 10%.

This makes SJM a great operating business.

But it also means the company earns enough money from its operations to continue investing in the business for growth… Without having to issue debt or equity.

Another way to show this is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 10.5% per year.

This is enormous.

I call this the “Cash Machine” metric.

I look for anything above 5% on a consistent basis for the same reasons as I look for high operating profit margins above.

If companies consistently earn above 5% on this number, it makes the company a cash machine that spits out more and more cash from its operations.

SJM earns enormous profits that make it an incredibly safe investment.

These profits also allow it to continually reinvest in operations.  And to pay you a large and continually growing dividend as well.

The enormous operating profits and cash flow allow growing dividend payments over time make SJM a safe income play in whatever is to come in the next few months or years.

But these profits also allow another layer of safety in the amount of debt the company has which is reason #3. 

SJM’s Low Debt Levels

With SJM being a multibillion company, you’d expect it to have debt.

And it does…  But its debt levels are extremely low compared to its profits and the equity in the company.  This makes SJM an even safer investment.

As of this writing its debt/equity ratio is 0.67.  I look to invest in companies with numbers below 1 on this metric.

Why?

Because the lower debt levels the company has means the lower chance it has of going bankrupt.  And this makes it a safer investment.

Generally, the more profits and cash flow the company produces the higher its debt levels can be without becoming problematic.

This gives the company a ton of options in how to run and grow the business.  Which further allows the company to work in creative ways to continue growing revenue, profits, and cash flows.

This cycle gives companies enormous advantages AKA optionality.

Another reason to consider buying SJM to Depression Proof Your Portfolio is because of its lack of being affected by the coronavirus which is reason #4.

The Coronavirus Won’t Harm SJM

Something people won’t stop during a depression is eating and feeding their kids and pets.

They may stop paying their mortgages.

They may stop paying their credit card bills.

And they may stop paying for their vehicle loans.

But they won’t stop feeding their kids and pets.

This was proved out on June 4th, 2020 when SJM released its most recent quarterly data where revenue improved by 10% when compared to the same period in 2019.

Because SJM’s in the necessary food and pet food industries its business won’t be affected by the coronavirus in any large way.  Even if this pandemic lasts for years.

This gives enormous stability to SJM in these highly uncertain times.  And it also means you should expect it to continue earning enormous profits and cash flows.  And this means you should expect the large dividend payments to continue as well.

But what about its valuation?  Is it cheap? 

SJM Is Also Cheap

This is reason#5…

With the markets at or near all-time highs you’d expect a fantastic stock like SJM to be selling at an enormous valuation.

But it’s not.

As of this writing its P/E is 15.3.

Its P/CF is 9.5.

And its Forward P/E is 12.7.

On all these metrics I look to buy investments below 20 to consider them for investment.

And SJM’s current valuations fall well below this number putting it into the cheap valuation category.

This means SJM stock offers you a margin of safety in investing terminology.

A margin of safety means you’re buying a safe investment… And this makes the investment even less risky.

Conclusion

If you’re looking for a solid, safe, stable, dividend paying, cheap, and enormously profitable investment to Depression Proof Your Portfolio – consider investing in JM Smucker.

Click here to see some of the other stocks we recommend to Depression Proof Your Portfolio.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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