Uncovering Hidden Gems: 2 Dividend Stocks to Buy at a Discount
In the world of investing, finding the perfect combination of safety, stability, and high dividend yields can be a daunting task. However, we’ve identified two magnificent dividend stocks that fit this bill: The Hershey Company (HSY) and MTY Food Group (MTYF.F). With their shares down 12% and 20% from their 52-week highs, and 33% and 39% below their all-time highs, now is the perfect time to scoop up these stocks at a discount.
A Sweet Deal: The Hershey Company
Hershey’s stability stems from its recession-resistant industries of chocolates and sweet and salty snacks. With a five-year beta of 0.37, this stock is less likely to plunge during bear markets, making it a “bedrock” holding for any portfolio. Despite facing short-term headwinds, Hershey’s market-leading brands, including Hershey, Kit Kat, and Reese’s, will endure.
The company’s recent acquisitions of Skinny Pop Popcorn and Dot’s Homestyle Pretzels are paying off, with sales growing by 13% and 65% annually since 2019. Hershey has also hiked its dividend payments twice in three quarters, raising its payout by a hefty 32%. With a dividend yield of 2.9% and a payout ratio of 55%, there’s plenty of room for future increases.
A Diversified Powerhouse: MTY Food Group
MTY’s stability comes from its wide-ranging diversification across 90 quick-service food brands, covering all four seasons and various cuisines. As a franchisor, MTY offloads risk and capital requirements to its franchisees, making it an asset-light operator with stable free-cash-flow margins. Even during the pandemic, MTY maintained a 20% FCF margin, higher than its current 15% mark.
The company’s focus on redeploying its rising FCF totals into new ventures has created a beautiful flywheel effect. With 27 acquisitions worth over $1.7 billion in the last decade, MTY has proven masterful at creating value. Its 2.3% dividend yield is at its highest level outside of the 2020 crash, using only 14% of its FCF. This leaves plenty of room for future increases or share buybacks.
A Compelling Investment Proposition
Both Hershey and MTY offer a unique combination of safety, stability, and high dividend yields. With their shares trading at a discount, now is the perfect time to invest in these magnificent dividend stocks. Don’t miss out on this opportunity to build a strong foundation for your portfolio and generate growing dividends for decades to come.
Key Takeaways
- Hershey and MTY are two magnificent dividend stocks offering a unique combination of safety, stability, and high dividend yields.
- Both stocks are trading at a discount, with Hershey down 33% and MTY down 39% from their all-time highs.
- Hershey’s stability stems from its recession-resistant industries, while MTY’s diversification and asset-light model provide a solid foundation.
- Both companies have a proven track record of creating value through strategic acquisitions and dividend increases.
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