Portfolio Update
The FiveTwenty portfolio received $65.55 in dividends in the past week. JNJ and WBA paid their quarterly dividend during the week.
| Past Week Dividend | $65.55 |
| Current Quarter Dividend (Q1 2022) | $828.46 |
| LifeTime Dividend | $2,939.27 |
| Estimated Annual Dividend | $4,660.62 |
The capital allocation for the week of 03/13/2022 to 03/19/2022 will be used to add to our position in Kellogg Co. (NYSE: K).
K – Position Update
Since our last check-in on K in week 40 of 2021, the company reported Q3 2021 earnings on 11/04/2021 and Q4 and FY 2021 earnings on 02/10/2022. Additionally, the share price dropped ~6.3% from $63.87 to $59.85.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 18 years | 18 years | |
| Yield | 3.88% | 3.60% | 3.07% |
| Payout Ratio | 55.64%1 | 57.21%2 | |
| P/E | 14.351 | 16.322 |
1 computed using TTM adjusted EPS of $4.16 as of Q4 2021
2 computed using TTM adjusted EPS of $4.02 as of Q2 2021
FY 2021 earnings report
Did K’s latest earnings report raise any warning flags?
For FY 2021, K saw revenue increase driven by positive price mix in all its operating regions. Adjusted operating profit, that excludes restructuring and mark-to-market charges, was essentially flat year over year despite the world-wide supply disruptions, labor strike, fire at a facility and higher inflation. Overall, revenue grew 3%, adjusted operating profit decreased 0.5%, and adjusted EPS were 4.3% higher than in FY 2020.
| Revenue (in millions) | Adj. Operating Profit (in millions) | Adj. EPS . | |
| 2020 | $13,770 | $1,811 | $3.99 |
| 2021 | $14,181 | $1,805 | $4.16 |
| % Change | 3% | (0.5)% | 4.3% |
Additional noteworthy developments during the quarter:
- On 02/18/2022, K declared a dividend of $0.58 per share payable on 03/15/2022 to shareholders of record at close of business on March 1, 2022.
Looking ahead, K expects revenue growth of 3%, operating profit growth of 1-2% and earnings per share growth of 1-2% for FY 2022. Additionally, it expects capital expenditure of $0.6 billion for the ear and free cash flow of $1.1-1.2 billion.
Thesis
Why are we adding to our position in K?
K managed a solid FY 2021 despite some serios headwinds in the form of the 12-week strike and fire at its US cereal facility, significant cost inflation, and world-wide supply chain disruption. The war in Ukraine which has driven wheat prices higher, will add to the company’s short-term challenges.
However, we continue to believe in the long-term prospects for the company and view the recent price declines as opportunities to build our position at attractive valuations.
Previous Articles
Additional Research
- Kellogg Stock: Strong Brands With Low Volatility (NYSE:K) | Seeking Alpha
- Kellogg Company: Slow And Steady Dividend Machine (NYSE:K) | Seeking Alpha
Photo by Sten Ritterfeld on Unsplash
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