J.M. Smucker Company (NYSE: SJM) reported strong second quarter fiscal 2024 earnings this week, beating earnings estimates and raising dividend income potential for investors.
The maker of household brands like Jif, Smucker’s and Folgers posted better-than-expected Q2 adjusted EPS of $2.59 per share, sailing past Wall Street’s consensus expectation of $2.47. Net sales of $1.94 billion were slightly short of the projected $1.95 billion.
While sales declined 12% on a year-over-year basis due to divestitures, foreign currency fluctuations and lower volume/mix, earnings showed resilience amid a dynamic operating environment. Furthermore, Smucker upwardly revised its full-year 2024 guidance to adjusted EPS of $9.25 to $9.65 from its previous outlook of $9.45 to $9.85 per share.
As a premier dividend stock, Smucker passive income has come more into focus following the company’s earnings beat. With a quarterly dividend payout at $1.06 per share, generating $500 per month in dividend earnings could be within reach for well-positioned investors.
How Much to Invest for $500 Monthly Smucker Dividend Income?
As of December 6th’s market close, Smucker stock has a dividend yield of 3.65%. This means that if you had invested in the stock, you would earn $3.65 in annual dividend income per $100 invested based on the company’s current dividend payout rate and stock price valuation.
For an annual dividend target of $6,000 ($500 monthly) – here is how much you would need to invest in Smucker stock:
- Smucker annual dividend per share: $4.24
- Annual dividends needed: $6,000
- $6,000 / $4.24 annual dividend rate per share = 1,415 shares
With Smucker closing at $116.12 on December 6, 1,415 shares would currently cost $164,310.
So if you invested just over $164K into J.M. Smucker stock today, you could earn $500 in monthly passive income or $6,000 annually from the dividends. Not a bad income stream!
What If Your Budget is Lower? Earning $100 Per Month?
Of course $164,000 is hefty price tag that most retail investors might not have laying around.
So what about a more modest dividend income goal, like $100 per month or $1,200 per year? How much Smucker stock would that take?
Doing the same calculation yields:
Target annual dividend earnings: $1,200
Divided by Smucker’s annual dividend of $4.24 per share
= 283 shares
With shares at $116 as of this writing, 283 shares would cost approximately $32,862.
For an investment of nearly $33K in Smucker stock today, you could generate about $100 in monthly dividend income, while also benefiting from potential capital appreciation over the long run. And of course, you must factor taxes owed on dividends too.
Two Key Dividend Considerations for Smucker Investors:
While checking out the latest dividend yield and payout ratios can help gauge the stability of Smucker income, investors should note that several other factors also come into play.
1. Dividend Yield Fluctuates with Stock Price
A stock’s dividend yield changes as the share price moves higher or lower. Right now, Smucker stock has pulled back over 10% year-to-date, boosting its current yield.
But if shares continue rebounding as seen Tuesday, the dividend yield would decrease at current dividend rates.
For example, if Smucker stock increased 25% from current prices to $145 per share over the next year, the dividend yield would fall from 3.65% to roughly 2.93% – even with no change in the quarterly dividend amount.
2. Dividend Payment Can Also Change Over Time
Just because a stock dividend yield is high today does not guarantee similar yields in future years. Dividend payments themselves can change, typically announced each quarter by a company’s management.
J.M. Smucker has impressive pedigree of dividend growth dating back decades. Over the past 5 years, Smucker has increased its dividend 5 out of 5 years – a positive signal. And the stock has rewarded loyal shareholders with rising dividends for the past 23 consecutive years.
However, these historical trends do not guarantee future payout hikes. If inflationary or consumer spending headwinds emerge in coming quarters, it’s possible Smucker slows dividend growth to protect its balance sheet.
Investors should monitor factors like Smucker’s cash flow, profits, and management outlook for signals on whether dividend distributions could change over your targeted investment timeline when constructing a dividend portfolio allocation.
Bottom Line: Does J.M. Smucker Present an Attractive Dividend Opportunity Today?
With its globally-recognized brands, Smucker is positioned as an industry leader in food staples, offering home pantries around the world. The company also maintains pricing power even during economic uncertainty.
Smucker’s long history of consistent dividend increases also appeals to income investors. For long-term investors focused on steadily growing passive income, Smucker deserves consideration for further research.
At today’s dividend yield of 3.65%, shares offer a compelling opportunity to begin building a dividend portfolio. While no stock dividend is guaranteed forever, Smucker’s strong free cash flow generation, reasonable payout ratio near 46% of earnings, and decades of dividend growth support probabilities of ongoing payouts.
For investors with approximately $164,000 to invest, purchasing enough J.M. Smucker shares today could realistically generate over $500 per month in dividends or $6,000 annually. And with a dividend aristocrat raising its payout for over 20 straight years, dividend growth over time further sweetens total return prospects.
Of course, every portfolio has unique needs and investing goals. But by understanding how dividend math works with Smucker stock today – including variables like dividend yield changes, dividend growth rates, and total return potential – you gain better clarity on whether this consumer defensive stalwart might earn a spot in your investment mix.