ConAgra Foods, Inc. (CAG): This Food Stock Still Looks Delicious

Going forward, I see the company continuing its restructuring efforts and returning more cash to shareholders. The company has been steadily increasing its dividend and now pays $2 per share for a yield of 3.6%. To do so, Kraft Foods Group Inc (NASDAQ:KRFT) just announced that it’s creating two new business units to manage its brands. One will be meal and desserts and the other will be enhancers and snacks. The goal is to allow each division to be run separately and develop new products, grow and reduce costs. The end result will be a much leaner Kraft Foods that can pay out more money to shareholders.

Nestle is a multinational food company with revenue of over $98 billion. Its products include baby food, bottled water, breakfast cereals, coffee, dairy products, frozen foods, ice cream, pet foods, and snacks.

The biggest argument some investors make about owning Nestle is that the company is, in fact, too large. That its ability to grow and deliver the returns of the past are going to be harder going forward. The problem I have with this is that the company has not shown any evidence of slowing down. Last year, the company had quarterly revenue growth of 12% and quarterly earnings growth of 14%.

Nestle also has the resources to continue investing in innovation. With over $10 billion in cash on its balance sheet, the company is looking to plow that back into research and development. Nestle just announced that it is spending $53 million on a new product technology center in Ohio. This will be the company’s 12^th such facility worldwide. It’s initiatives like these that have made Nestle number one in the frozen foods market with its brands Stouffer’s, Lean Cuisine, Hot Pockets, and Digiorno.

Foolish assessment

I really like the foods business and, in particular, ConAgra Foods, Inc. (NYSE:CAG). The acquisition of Ralcorp is looking better and better for the company. The long-term outlook for the company is bright along with that of the other food companies in the market. In the end, people have to eat and the food business is the place to be.

The article This Food Stock Still Looks Delicious originally appeared on Fool.com and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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