Creating texture
Ingredion Inc (NYSE:INGR) makes “starches, sweeteners, texturants, and nutritionals” that go into the taste and texture of items such as food, medicine and corrugated cardboard. The crispiness of crackers and the smoothness of baby powders may come from materials that Ingredion Inc (NYSE:INGR) makes and sells. This company also sells chemicals that preserve food texture during freezing.
Ingredion’s list of managers includes people with years of experience in the company. Many of them started with Ingredion Inc (NYSE:INGR)’s predecessor company CPC and rose through the ranks to their current position. Others like Chairman, President, and CEO Ilene S. Gordon came in from the packaging industry, which Ingredion serves.
Moreover, Ingredion Inc (NYSE:INGR) manages their company on a decentralized geographic basis or on a region to region basis, enabling it to more efficiently respond to local market conditions. This better positions the company to capitalize on emerging markets growth. Ingredion’s century of experience as a global company can help in this regard.
Since 2008 Ingredion Inc (NYSE:INGR) grew its revenue and free cash flow 86% and 67%, respectively, according to the chart below. This translated into a return of 52% versus a 16% return for the S&P 500.
INGR Revenue TTM data by YCharts
In its most recent quarter, Ingredion increased revenue less than 1%. Its operating cash flow sunk into the negative versus the same time last year due to a large increase in working capital and accounts receivable. Weaknesses in South America and currency headwinds served as a drag on growth. Volume dropped across Ingredion Inc (NYSE:INGR)’s geographic segments; however, Ingredion’s pricing power still enabled the company to increase overall revenue.
A slowing global economy and uncertainty surrounding corn prices enticed management to issue a cautious outlook for 2013. However, over the long term increasing global demand for food could serve as a catalyst for superior long-term growth in the company’s stock price.
In the meantime shareholders can enjoy a 2.1% dividend yield representing just 16% of 2012 free cash flow. The stock trades at just 13 times earnings as of this writing; a plus in this new raging bull market we reside in.
More than salt and pepper
Flavoring company McCormick & Company, Incorporated (NYSE:MKC) makes spices, flavoring, sauces, gravy, and even honey. If you stroll through your local grocery store you may notice neat new displays and advertising for the company’s products as McCormick & Company, Incorporated (NYSE:MKC) seeks to increase visibility of its brand among consumers.
McCormick & Company, Incorporated (NYSE:MKC) employees own a 21% stake in the company through its 401K plan. This increases a sense of loyalty and pride among employees and managers who share in the risks and rewards of the business.
In the chart below you can see that since 2008 McCormick & Company, Incorporated (NYSE:MKC) grew its revenue and free cash flow 32% and 48%, respectively. This translated into a return of 101% versus the S&P 500 return of 16%.
MKC Revenue TTM data by YCharts
McCormick pays out roughly half of its free cash flow out in dividends. As of this writing McCormick pays its shareholders $1.36 per share per year translating into a 1.9% dividend yield.
Like Ingredion Inc (NYSE:INGR), McCormick & Company, Incorporated (NYSE:MKC) faces a softening global economy specifically within McCormick’s industrial segment. Consumers are increasingly apprehensive about eating out with the combination of higher prices and a smaller paycheck. However, McCormick saw an increase of 7% in its consumer business as the result of people eating in more.
Increases in brand visibility, shelf space and further expansion into emerging markets should continue to boost McCormick & Company, Incorporated (NYSE:MKC)’s revenue and free cash flow, translating into future superior shareholder gains.
Jam, peanut butter, coffee, etc.
Food conglomerate The J.M. Smucker Company (NYSE:SJM), best known for its iconic jelly products, also makes Folger’s coffee, ice cream toppings, pancake syrup, and Uncrustables jelly sandwiches.
Members of The J.M. Smucker Company (NYSE:SJM) family still control more than 3% of the company and they serve in active management roles. This means they retain a vested interest in keeping the company going at a profitable pace.
Over the past five years, The J.M. Smucker Company (NYSE:SJM)’s revenue and free cash flow increased 125% and 364%, respectively (chart below). Smucker’s expansion in share price equates to 99% over the same time versus the S&P 500 return of 16%. Currently J.M. Smucker pays out 31% of its free cash flow in dividends. It currently pays out $2.08 per share per year yielding approximately 2% as of this writing.
SJM Revenue TTM data by YCharts
The future looks bright as The J.M. Smucker Company (NYSE:SJM)’s enters into emerging markets. International sales and profit increased 28% during its most recent quarter. Overall sales increased 6% in The J.M. Smucker Company (NYSE:SJM)’s most recent quarter and free cash flow declined 21%; however, free cash flow increased year to date due to lower inventory purchase needs. People like their jelly, donuts, and coffee, and with the company backed by strong management, Smucker should reward shareholders handsomely for the foreseeable future.
Conclusion
Food serves a vital role in society. The above companies make products that produce or enhance the eating experience. Over the long term they should provide superior returns with dividend payments while you wait. These companies deserve a place in your portfolio.
The article 3 Companies That Add Taste and Texture to Your Portfolio originally appeared on Fool.com and is written by William Bias.
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