A Great Buy-and-Hold Dividend

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Investors probably get pretty tired of all the dill-ightful spice puns that show up in articles about seasoning giant McCormick (NYS: MKC) , so I'm not going to waste time using them. Instead, I'm going to cut right to the chase: This dividend stock's excellent global growth will delight investors for years to come.

Acquisitions abroad
Right now, 9% of total sales come from markets outside of the U.S. McCormick wants to increase that number to 12% by 2015, and, with the recent acquisition of Poland-based Kamis, it is well on its way. Kamis is a spice and seasoning leader in Poland, so McCormick gains a solid position immediately, but the acquisition also enhances McCormick's ability to penetrate additional markets in Eastern Europe.

McCormick is also forming a joint venture in India and will control an 85% stake in Kohinoor Foods once that deal closes during the second half of fiscal 2011. Again, this positions the company well for growth abroad.

Returns at home
The immediate impact of the Kamis acquisition is that expected earnings per share will likely drop by $0.03 for 2011. But, for patient investors, the same acquisition is expected to boost earnings per share $0.06 in 2012.  

On top of that, McCormick is a solid dividend stock. It has an 87-year dividend history and has really emphasized growth in the last five years.

Company

5-Year Average Annual Dividend Increase

Dividend Yield

McCormick

9.7%

2.5%

Kraft (NYS: KFT)

4.7%

3.4%

Tyson Foods (NYS: TSN)

0%

1.0%

ConAgra Foods (NYS: CAG)

(2.3%)

3.9%

Source: Capital IQ, a division of Standard & Poor's.

McCormick's increases since 2006 look great compared with a few food industry competitors.

The next target
In order for McCormick to stay on top in the future, the company needs to continue to grow at home and abroad. In a June presentation, McCormick executives stressed how big a role that acquisitions and joint ventures will continue to play in that growth.

Right now, McCormick's biggest weakness is also its biggest opportunity. The company has no operations in South America, making that continent a prime target for acquisitions or joint-venture related growth.

Opportunity for growth also exists domestically. As recently as 2009, the company aimed a horrifyingly low $7,000 (less than 1%) of its annual marketing budget at Hispanics. Somewhat paradoxically, sales of Hispanic products were up nearly 50% between 2005 and 2010, and McCormick expects $100 million in sales in 2011.

The sales jump can be explained two ways. First, Hispanics are the fastest-growing demographic in the U.S., up 42% from 2000, and sales were bound to increase as the population did. Second, since 1999 McCormick has acquired three major U.S. brands that Hispanics are already loyal to: El Guapo, Lawry's, and El Bravo. And, as polling firms have shown, Hispanics have strong brand behavior with little to no ceiling for price sensitivity.

If McCormick can spend a little more marketing to this demographic, that $100 million sales number will increase on the strength of brand loyalty.

Foolish takeaway
A strong company with an actionable strategy for growth, McCormick should be on every buy-and-hold investor's radar. Intense effort to expand overseas buoyed by a great dividend history make this stock a winning consideration for your portfolio.

Interested in dividend stocks? Check out our free report,"13 High-Yielding Stocks to Buy Today."



At the time this article was published Fool contributorAimee Duffydoesn't own shares of the companies mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of McCormick. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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