Pinnacle Foods Inc (PF), General Mills, Inc. (GIS): This Food Stock Enjoys a Healthy Appetite for Dividends

Pinnacle Foods’ products are in the value category. While its brands are household names, they serve neither the top or bottom of the market, making them a beneficiary of buying down. Likewise, when the economy improves, Pinnacle Foods Inc (NYSE:PF) also benefits as consumers move up to known brands.

There’s upside potential, as well. As the company pays down debt it incurred when it was sold by The Blackstone Group L.P. (NYSE:BX), free cash flow will only grow. There’s reason to believe that the now-public company will be able to refinance much of its debt at lower rates when senior notes mature between the years 2014 and 2018.

Additionally, Pinnacle Foods Inc (NYSE:PF) could be a future candidate for another private equity takeover or acquisition from a larger strategic, which could allow it to use distribution synergies to edge out larger profits from each dollar in sales.

The company raised $580 million in its IPO, which will be used exclusively to pay down debt, helping the firm put a dent in its $2.5 billion long-term debt, according to the S-1. For investors seeking a potential play in the food space, this new IPO is worth another look. Its dividend policy ensures that investors will participate in earnings growth as dividends rise along with the bottom line.

The article This Food Stock Enjoys a Healthy Appetite for Dividends originally appeared on Fool.com and is written by Jordan Wathen.

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