2023 Week 13: Kellogg Co. (NYSE: K)

Portfolio Update

The FiveTwenty portfolio received $147.63 dividends in the past week. HD, LMT, and VFC paid their quarterly dividend during the week.

Past Week Dividend$147.63
Current Quarter Dividend (Q1 2023)$1,961.06
LifeTime Dividend$10,069.50
Estimated Annual Dividend$8,600.37
Dividend Scorecard

The capital allocation for the week of 03/26/2023 to 04/01/2023 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 50 of 2022, the company reported Q4 and FY 2022 earnings on 02/09/2023. In addition, the share price decreased 9.5% from $72.34 to $65.47.

TTMPrev. Update10-year median
Dividend Streak19 years19 years
Yield3.59%3.23%3.18%
Payout Ratio55.56%156.80%2
P/E15.48117.562
Entry Criteria Scorecard

1 computed using TTM adjusted EPS of $4.21 as of Q4 2022
2 computed using TTM adjusted EPS of $4.12 as of Q3 2022

Q4 and FY 2022 earnings report

Did K’s latest earnings report raise any warning flags?

For the full year 2022, K’s financial results exceeded the guidance for currency-neutral growth for revenue, adjusted operating profit, and adjusted EPS provided as part of it’s Q3 earnings report. Headwinds from inflation and worldwide supply disruptions were offset momentum in snacks and emerging markets as well as a recovery of the North America cereal business. Overall, revenue grew 8% (11.5% currency-neutral), adjusted operating profit increased 3.9% (7.0% currency-neutral), and adjusted EPS were 1.2% (5.3% currency-neutral) higher compared to FY 2021.

Revenue
(in millions)
Adj. Operating Profit
(in millions)
EPS
.
2021$14,181$1,805$4.16
2022$15,315$1,874$4.21
% Change8%3.9%1.2%

Additional noteworthy developments during the quarter:

  • On 02/17/2023, K declared a dividend of $0.59 per share payable on 03/15/2023 to shareholders of record at the close of business on 03/01/2023.
  • During the earnings release, the company re-iterated its expectation that the North America cereal business spin-off will be completed by year end. Furthermore, K announced that it has decided to retain the plant-based business.

Looking ahead, K expects net sales growth of 5-7%, operating profit growth of 7-9%, and adjusted EPS decline of (2)-(4)% on a currency-neutral basis. Additionally, it expects capital expenditure of $0.7 billion on cash flow of $1.0-$1.1 billion.

Thesis

Why are we adding to our position in K?

K’s business has navigated the high inflationary environment and currency headwinds during FY 2022 quite well and has managed to grow its revenue, adjusted operating profit, and adjusted EPS.

We continue to be confident in the long-term prospects of the company, and are taking advantage of the recent pullback in the share price to add to our position at an attractive starting yield of 3.59%.

Previous Articles

Additional Research


Photo by Mario Serpas on Unsplash

One Reply to “2023 Week 13: Kellogg Co. (NYSE: K)”

Comments are closed.