Portfolio Update
The FiveTwenty portfolio received no dividends in the past week.
| Past Week Dividend | $0 |
| Current Quarter Dividend (Q4 2021) | $275.29 |
| LifeTime Dividend | $1,376.62 |
| Estimated Annual Dividend | $3,275.13 |
The capital allocation for the week of 10/31/2021 to 11/06/2021 will be used to add to our position in J.M. Smucker (NYSE: SJM).
SJM – Position Update
Since our last check-in on SJM in week 10 of 2021, the company reported Q4 2021 earnings on 06/03/2021 and Q1 2022 earnings on 08/26/2021. Additionally, the share prices increased 3.8% from $118.34 to $122.86 during the same period.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 24 years | 23 years | |
| Yield | 3.00% | 3.04% | 2.35% |
| Payout Ratio | 42.7%1 | 36.5%2 | NA |
| P/E | 14.241 | 12.102 | NA |
1computed using TTM adjusted EPS of $8.63 as of Q1 2022
2computed using TTM adjusted EPS of $9.78 as of Q3 2021
Q1 2022 earnings report
Did SJM’s latest earnings report raise any warning flags?
In Q1 2022, SJM saw a decrease in revenue, adjusted net income, and adjusted EPS. Excluding the Crisco and Natural Balance divestitures and foreign currency exchange revenue increased 1%. Adjusted net income was also negatively impacted by higher costs, primarily driven by increased commodity and transportation costs. Adjusted EPS were positively impacted by a 5% reduction of shares outstanding. Overall, revenues decreased 6%, adjusted net income dropped 25%, and adjusted EPS were 20% lower compared to Q1 2021.
| Revenue (in millions) | Adj. Net Income (in millions) | Adj. EPS . | |
| Q1 2021 | $1,972 | $270 | $2.37 |
| Q1 2022 | $1,858 | $205.8 | $1.90 |
| % Change | (6)% | (25)% | (20)% |
Additional noteworthy developments during the quarter:
- ON 07/08/2021 SJM increased its quarterly dividend 10% from $0.90 to $0.99 per share.
Looking ahead, SJM updated its full year 2022 guidance. The company now expects revenue to decrease 2.5% to 1.5% compare to the previous 3% to 2% decrease. Excluding the divested Crisco and Natural Balance businesses, revenues are expected to increase approximately 2.5%. Guidance for adjusted EPS was $8.25 to $8.65 down from the previous range of $8.70 to $9.10.
Thesis
Why are we adding SJM to the FiveTwenty portfolio?
SJM had a solid FY 2021. The company grew revenue, adjusted net income and adjusted EPS at 3%, 2.6% and 4.1% respectively. For FY 2022 the company is facing material headwinds in the form of rising cost driven by increased commodity and transportation costs.
However, SJM is on track to increase comparable revenue 2.5% for FY 2022 and has demonstrated its commitment to paying a dividend by raising its quarterly payout 10% earlier in the year. Therefore, we feel comfortable adding to our position at the current fair valuation and above average dividend yield.
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