Delectable Small-Cap Food And Beverage Stocks
Investors usually prize food and beverage stocks for factors such as dependable and growing dividends, predictable earnings and the sector's reputation for having a low beta relative to the broader market. At least those are the reasons why investors covet large-cap food and beverage names such as General Mills (NYSE: GIS) and Coca-Cola (NYSE: KO).
However, the food and beverage space offers more than just stodgy, slow-growth blue-chip names. Traveling down to small-caps and even micro-caps does mean incurring additional risk, but with that trade-off comes the potential to generate impressive returns. Yes, even with food and beverage stocks. Here are a few examples investors may want to put on their plates.
Rocky Mountain Chocolate Factory (Nasdaq: RMCF) Colorado-based Rocky Mountain Chocolate Factory operates as a confectionery manufacturer, franchisor, and retail operator in the U.S. and around the world. As an indicator of how much investors have warmed to this name, the company now has a market value of $71 million compared with just $57 million 10 months ago.
That means this is a micro-cap stock, but Rocky Mountain Chocolate can say two things that many micro-caps cannot. First, the company is consistently profitable. Second, the company is debt-free.
Additionally, the company is expanding into high-growth emerging markets such as China and has plans to open stores in parts of Southeast Asia. Not to mention, some of Rocky Mountain's important statistics compare favorably with Hershey (NYSE: HSY). For example, Rocky Mountain trades at 13.5 times forward earnings with a dividend yield of 3.74 percent. Hershey trades for 21.7 times forward earnings with a yield of just 2.16 percent.
National Beverage (NASDAQ: FIZZ) Florida-based National Beverage makes and sells soft drinks, energy drinks and shots, juices, teas, still and sparkling waters, and nutritionally enhanced beverages, as well as produces soft drinks. Coca-Cola or PepsiCo (NYSE: PEP) this is not, but that does not mean this sub-$650 million company does not have something to offer investors.
Like Rocky Mountain Chocolate, National Beverage is debt free and that has helped the company pay out almost $8.90 a share in special dividends over the past decade. Reinvesting those dividends would have helped investors garner returns well in excess of those offered by Coca-Cola over the past twenty years.
And like Rocky Mountain, National Beverage is an example of small-cap offering better key statistics than a more recognizable, larger rival. National Beverage has a return on assets of 21.5 percent, return on equity of 35.3 percent and a return on investment of 30.4 percent. For Coke, those numbers are 10.5 percent, 26.5 percent and 15.4 percent.
Lancaster Colony (NASDAQ: LANC) With a market value of exactly $2 billion, Lancaster Colony could graduate to mid-cap status at any moment, but that does not change the fact that this low-beta (beta of just 0.32) dividend play is worth a look. The company owns the Marzetti, T. Marzetti, Cardinis, Pfeiffer, Simply Dressed, and Girards brands among some other recognizable labels and like the other names on this list has no debt.
While the yield is not great (2.1 percent), income investors should note that Lancaster Colony has grown its dividend by 5.7 percent annually over the past five years and is in the midst of a five decades long dividend increase streak.
The shares are up 15 percent in the past year, roughly double the returns offered by General Mills.
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