3 Food Stocks Providing Recession-Proof Dividends
These companies can continue their payouts even if the economy turns sharply lower.
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Investors tend to flock to areas of safety leading up to, and during, periods of recession. This is because when a recession strikes, earnings at cyclical companies tend to decline more sharply.
This in turn means the technology and consumer-discretionary sectors tend to perform poorly in bear markets, while others, like consumer staples stocks, usually outperform due to their reliable earnings.
In this article, we’ll look at three food stocks that are able to continue paying dividends, and increasing them, even in a severe recession.
General Mills: Resilient During Recessions
General Mills GIS manufactures and distributes branded packaged foods globally. The company sells a diverse slate of goods, including cereals, yogurt, soup, meal kits, snack bars, ice cream, nutrition bars, frozen pizzas, pet food and more.
On March 19 General Mills reported fiscal 2025 third-quarter results. Net sales and organic sales fell 5% each from the year-earlier quarter, due primarily to retailers reducing inventories. Gross margin expanded to 33.9% from 33.5%, as cost savings offset input inflation.
Adjusted earnings per share decreased 15% from a year earlier, to $1 from $1.18, but exceeded analysts’ consensus estimate by 4 cents.
General Mills is facing tough comparisons, as the pandemic has subsided. It generates 85% of its sales from at-home food demand. It is also facing high cost inflation, which is likely to persist for a while. In addition, it is currently investing in its pet business to reinvigorate growth.
The stock has proven resilient during recessions and market selloffs because people tend to eat at home more during difficult economic periods. In the Great Recession, while most companies saw their earnings collapse, General Mills grew its earnings per share by more than 10% per year from 2007 to 2010.
The company also reiterated its guidance for fiscal 2025 in its latest conference call. It expects organic sales to be essentially flat with a year earlier and earnings per share to grow 4% to 5%. We expect about 5% annual earnings-per-share growth until 2029, mostly thanks to Blue Buffalo pet food. EPS will also benefit as share buybacks resume, now that the balance sheet has strengthened.
This level of EPS growth enables the company to raise its dividend. GIS stock currently yields 4%.
Campbell's Co.: Much More Than Soup
Campbell's Co. CPB, formerly Campbell's Soup, is a multinational food company headquartered in Camden, N.J. The company makes and markets branded convenience-food products, such as soups, simple meals, beverages, snacks and packaged fresh foods.
The company’s portfolio focuses on two specific businesses: Campbell Snacks and Campbell Meals and Beverages. Campbell's generated annual sales of $9.6 billion in fiscal 2024.
On March 12, 2024, Campbell's closed the acquisition of Sovos Brands (SOVO) for $23 a share cash, which represented a total enterprise value of $2.7 billion,. The deal was funded by issuing new debt.
Sovos is a leader in high-growth premium Italian sauces and owns the market-leading Rao’s brand. Through the deal Campbell's met its goal of building a $1 billion sauce business. Sovos joined Campbell’s Meals & Beverages division.
Campbell's reported fiscal 2025 second-quarter results on March 5. Net sales for the quarter improved 9% year-over-year to $2.7 billion. This increase resulted mostly from the Sovos Brands acquisition. Adjusted EPS for the quarter was 8% lower year-over-year at 74 cents a share, which beat expectations by two cents.
The company repurchased $56 million of shares in the first half. Some $301 million remains under the current $500 million share-buyback program, which is in addition to the $205 million remaining on its anti-dilutive share-repurchase program.
Campbell's is building a brand powerhouse and focusing on growing its North American business. Campbell's has grown earnings per share at about a 1.7% average annual rate since 2015. Earnings for 2019, which was largely a transition year at the company, came up short due to higher adjusted net interest expense.
CPB shares currently yield 3.9%.
J.M. Smucker: Adding On-Trend Products
J.M. Smucker SJM is a global manufacturer of packaged food and beverage products including iconic names like Smucker’s, Jif and Folgers, along with various pet food brands. The company generated $8 billion in sales last year.
On Feb. 27 Smucker reported results for the fiscal 2025 third quarter ended Jan. 31. Currency-neutral organic sales dipped 1% from the year-earlier quarter, due mostly to supply-chain disruptions. Adjusted earnings per share grew 5% to $2.61 from $2.49, and exceeded analysts’ consensus estimate by 24 cents.
Thanks to better-than-expected performance, Smucker’s slightly improved its guidance for fiscal 2025 earnings per share. It lowered its guidance for sales growth to 7.25% from a range of 7.5% to 8.5% but raised its guidance for adjusted earnings per share to a range of $9.85-$10.15 from $9.70-$10.10.
Smucker has grown EPS an average 5.1% per year over the past decade. Previously, the company provided long-term guidance for 8% annual earnings-per-share growth.
Coffee is a strong, sticky segment for the business and Smucker’s is working to expand the current iconic lines, such as Jif peanut butter, to more on-trend products like granola bars and on-the-go snacks.
During the last recession, Smucker’s held up exceptionally well, growing both earnings and dividends during this time.
With a fiscal 2024 dividend payout ratio expected to be below 60%, the current dividend payout is secure, with room for growth. SJM has increased its dividend for 28 consecutive years. SJM stock currently yields 3.6%.
At the time of publication, Ciura had no positions in any stocks mentioned.