Hershey Company (HSY): Dividend Growth Stock Outlook for 2024

The Hershey Company (NYSE:HSY), a renowned confectionery manufacturer, has consistently rewarded its shareholders with dividends, demonstrating a robust financial position and a commitment to returning value. As of 2023, Hershey has a commendable track record of increasing dividends for 14 consecutive years. This report delves into the company’s dividend prospects and presents an analysis of its potential for 2024, drawing on insights from financial analysts and market trends.

Dividend Performance and Company Resilience

Hershey’s dividend yield stands at 2.61% with an annual dividend of $4.77 per share. The company’s most recent ex-dividend date was November 16, 2023, and it maintains a quarterly dividend payout schedule. Hershey’s dividend yield is higher than the bottom 25% of all stocks that pay dividends, signaling a meaningful return to its investors.

The dividend payout ratio, which is the percentage of earnings paid to shareholders in dividends, is currently 51.35%. This ratio suggests that Hershey retains nearly half of its earnings for growth and operational needs, a balance that indicates a sustainable dividend policy. The expectation of earnings growth from $9.53 to $9.97 per share in the coming year further supports the potential for continued dividend increases).

Market Context and Analyst Views

Despite the broader market volatility and a pivot towards technology stocks leading the rally in 2023, Hershey’s shares have retraced, which some analysts believe has left the stock undervalued. This situation presents Hershey as a defensive stock with an attractive entry point for investors seeking both dividend income and capital appreciation potential.

Analysts have recognized Hershey’s capacity for innovation as a critical factor for its success in 2024, especially after a challenging end to 2023. Despite a 34% decline in share price from its all-time high in early May 2023, Hershey’s fundamental growth in earnings per share and a strong brand presence underpin its investment appeal (Yahoo Finance).

Dividend Growth Prospects for 2024

Looking ahead to 2024, Hershey is anticipated to benefit from deflationary trends, which could enhance its dividend attractiveness. The company’s higher growth rate, coupled with its history of share buybacks, positions it favorably for dividend increases and capital gains.

The expectation of Hershey’s EPS growth in 2024 and 2025 suggests that there is “fuel in the tank” for future dividend increases. This growth trajectory, along with the company’s strategic initiatives and market positioning, points to a positive outlook for dividend growth in 2024. Investors could potentially benefit from a modest yield that is likely to grow, alongside the potential for share value appreciation.

Conclusion

In summary, the Hershey Company is well-positioned to continue its streak of dividend growth into 2024. Analysts view Hershey as an undervalued stock with a strong commitment to dividend growth, supported by a solid financial foundation and prospects for EPS growth. The company’s resilience in the face of market headwinds and its strategic focus on innovation and growth further bolster confidence in its ability to deliver shareholder value through dividends and stock appreciation.

The balance of Hershey’s payout ratio, the anticipated earnings growth, and the broader market context suggest that Hershey remains an attractive dividend growth stock for 2024. Investors looking for a combination of income and growth should consider the potential that Hershey offers, especially in a market environment that may favor defensive stocks with strong fundamentals and a history of rewarding shareholders.

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