McCormick & Company (NYSE:MKC)

McCormick & Company (NYSE: MKC) is an American food and beverage company based in Sparks, Maryland. The company was founded founded in 1889 in Baltimore before moving to its nearby suburbs. Today, it owns various food brands, most of which specialize in spices. The best known in Europe and Canada are: Billy Bee Honey, Club House, Ducros and... McCormick. (source Wikipedia)

Spices... we've seen more exciting things in terms of investment. And yet, here is another business model that is simple to manage, sustainable and not very sensitive to the economic situation. McCormick has a beta of only 0.43, associated with low volatility (9.94%). The dividend payment policy is also prudent, since only 38,45% of the profit is allocated to shareholders. This ensures the continuity and increase of distributions in the future, even in the event of a difficult transition. The company has also increased its dividend for 19 consecutive years, which gives a fairly good idea of the solidity of McCormick's business model.

In recent years, distributions have grown at an annual rate of 8,57%, which is quite good. Taking into account the evolution of earnings per share over the last five years (+14,13%), we realize that the dividend growth is also carried out at a very cautious rate and that it explains the current low distribution ratio. We are not going to blame the company's cautious policy, of course, but A slightly higher dividend increase would probably not be excessive.. This is perhaps what is likely to happen in the future if McCormick's earnings capacity continues on the same trend.

The yield is relatively modest, at 2.63%. This is explained by the low growth in distributions, but especially by the soaring price since 2009. From a profit perspective, even if the valuation has increased over the past few months, it remains at relatively low historical levels. We can also see in the graph below the very low sensitivity of the title to market fluctuations. The company has also been beating the market since the early 1980s and particularly in the last two years.

In view of the above, our analysis model considers McCormick as a position to maintain if we already have it in our portfolio. On the other hand, its current valuation, especially from the point of view of dividends, and the still average growth of its distributions, do not make it a purchase opportunity at the present time.