A Cooking Dividend Play - Sara Lee (SLE)

In previous articles we have touched on the defensive characteristics of food groups and how these well these businesses fit into a dividend investor’s portfolio.

One stock which tends to fly beneath the radar when considering food stocks is that of Sara Lee Corporation (SLE), which is listed on the New York, Chicago and London Stock Exchanges.

Sara Lee (SLE) is a global food manufacturer delivering products into the bakery, beverage, food service and household body care market segments. Company brand names include Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Kiwi, Sanex, Senseo and its namesake, Sara Lee.

The company offers investors a yield of 3.1% which makes it competitive with the likes of Kellogg's (K) and Kraft Foods (KFT) and it trades on an undemanding price to earnings multiple of 15 times earnings.

From a dividend perspective, the company has a solid track record of paying quarterly dividends.

In mid-September, the company gave an upbeat outlook for the 2011 financial year. The company had also been putting its money where its mouth is, so to speak: during the first quarter of fiscal 2011 the firm had bought back $360m worth of its own shares (about 3.7% of shares in issue).

When the company reported full-year earnings in August, it showed an improved performance all round. Marketing spend was up 20% while cash flow from operations improved to $952m for the year compared to $900m in the previous year.

During the past quarter the company divested the International Household and Body Care business, took receipt of a portion of the divestiture proceeds and executed a $500 million accelerated share repurchase program. The company also committed to maintaining and gradually increasing the dividend.

With management at the company seeing value in the shares and the dividend being given a mention, dividend seeking investors can give Sara Lee (SLE) some serious consideration for their portfolios.

Rumors doing the rounds today indicate buyout firm KKR are interested in Sara Lee (SLE), resulting in shares of the company increasing by 6.4%.