Hillshire Brands Co (HSH): A Profitable and High Yielding Food Company

Most profitable with highest dividend yields

In comparison with its peers, including Hormel Foods Corporation (NYSE:HRL) and Tyson Foods, Inc. (NYSE:TSN), Hillshire is the smallest company. Hillshire, with 9,500 employees, has more than $3.7 billion in market capitalization. Hormel Foods has 19,700 employees and its market capitalization is $9.23 billion. Tyson, with 115,000 employees, is worth more than $8 billion in the market.

Among the three, Tyson has the lowest operating margin and return on invested capital. Hormel and Hillshire had the same operating margin of 9%. Hillshire enjoyed the extremely high return on invested capital, 117%, while the ROIC of Hormel and Tyson were 16.45% and 4.44%, respectively. Hillshire is also paying investors the highest dividend yield, at 2.7%. In terms of valuation, Hormel has the highest valuation at  10.36x EV/EBITDA. Tyson is the cheapest with a 5.35x EV/EBITDA, while Hillshire’s valuation stands in between at nearly 8x EV/EBITDA.

My Foolish Take

With the leading market position, high ROIC and dividend yield, Hillshire seems to be a good stock to hold for the long-term. I personally think that if Hillshire was acquired, the buyout price might value Hillshire at double digit EV multiples.

The article A Profitable and High Yielding Food Company originally appeared on Fool.com and is written by Anh HOANG.

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