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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week


February 27th 2009 Heinz
NYSE Symbol: HNZ
Industry: Ketchup
Stock price as of 2/27: $32.67

The dividend cuts keep coming. A surprise this week came from JP Morgan cutting their dividend by 80%, not because they had to, but because they wanted to preserve more cash. Then on Friday, GE surprised the markets will a dividend cut. These moves will probabley put pressure on other financials to cut their dividends. Are you listening, Wells Fargo? Luckily there are a few blue chip defensive companies maintaining or raising their dividends. In the last several months I have featured four companies that have actually raised their dividends in the last year. The list includes 3M, McDonalds, Travelers, and Caterpillar. Coca Cola just this week raised their dividend for the 47th straight year. Not bad. But this weeks' featured stock just beat earnings estimates and actually expects earnings to improve this year. Go figure. The featured stock of the week is Heinz. The producer of ketchup and Ore-Ida potatoes raised their dividend last summer and sports a
hefty yeild of 5.2%.
As one reporter put it, Heinz squeezed out a profit. Earnings rose an impressive 11% beating estimates by 12 cents thanks in part to management's decision to raise prices. Sales declined 7.5% to $2.41 billion. Heinz saw sales hold up within their core brands while sales slipped among the frozen foods. Heinz has benefitted from consumers eating in rather than eating out to save money. Although grocery sales did decline 3.5% in the quarter due to consumers using up inventory in their cupboards and buying more generic brands. For 2009, Heinz offered in-line guidance $2.87-2.91 a share. Organic sales are expected to grow around 6% which calculates into revenue of $10.67 billion. Not many companies can forecast growing sales and earnings for 2009.
The valuation of Heinz, like most stocks, is compelling. Heinz is trading for one times sales and a PE of 11. The dividend yield as mentioned is 5% and goes ex-dividend in three weeks.