2021 Week 40: Kellogg Co. (NYSE: K)

Portfolio Update

The FiveTwenty portfolio received $41.86 in dividends in the past week. TROW and MDU paid their quarterly dividend during the week.

Past Week Dividend$41.86
Current Quarter Dividend (Q3 2021)$595.99
LifeTime Dividend$1,101.33
Estimated Annual Dividend$2,936.33
Dividend Scorecard

The capital allocation for the week of 10/03/2021 to 10/09/2021 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 21 of 2021, the company reported Q2 2021 earnings on 08/05/2021. Additionally, the share prices decreased ~4% from $66.50 to $63.87 during that period.

TTMPrev. Update10-year median
Dividend Streak18 years18 years
Yield3.60%13.43%23.07%
Payout Ratio57.21%155.34%2NA
P/E16.3216.142NA
Entry Criteria Scorecard

1 computed using TTM adjusted EPS of $4.02 as of Q2 2021
2 computed using TTM adjusted EPS of $4.12 as of Q1 2021

Q1 2021 earnings report

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

For Q2 2021, K saw a slight increase in revenue over the same period a year ago due primarily to double digit growth in the emerging markets business. The revenue growth was occurred on top of an exceptionally strong quarter a year ago. Net earnings and EPS, however, impacted by higher costs and unfavorable comparison to the year ago quarter that benefited from unusually high operating leverage ware lower than in the previous quarter. Overall, revenues grew 2.6%, adjusted net earning decreased 11.6%, and EPS were 8.1% lower compared to Q2 2020.

Revenue
(in millions)
Adj. Net Income
(in millions)
Adj. EPS
.
Q2 2020$3,465$562$1.24
Q2 2021$3,555$497$1.14
% Change2.6%(11.6%)(8.1%)

Looking ahead, K raised its full year revenue growth guidance to 0-1% from a previous guidance for flat revenue. This is the second quarter in a row the company has raised revenue guidance. At the same time EPS growth guidance remained unchanged at 1-2%.

Thesis

Why are we adding K to the FiveTwenty portfolio?

With an additional quarter in the books, our investment thesis remains the same as in the last update. K continues to steadily execute on its growth strategy and the share price continues to offer an attractive dividend yield at a reasonable valuation.

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