Monday, February 22, 2010

Campbell Soup -- Is Dividend Shaky?

Campbell Soup (CPB) manufactured a growing bottom line, but top line growth is suspect. Soups Sauces and Beverages are in serious decline. Particularly in the US. One in eight working Americans uses food stamps; is this really killing the soup business.

This US category has been in serious decline for quite some time. But for some reason the international numbers are growing smartly. Campbell’s needs to take the problem to hand and start addressing it as a marketing problem.

They are not thinking globally and are neglecting their largest easiest to serve market. Which surprisingly is in their own back yard.

Cost reduction is a short term fix where the CFO rules. There is a point where the lack of top line growth will ratchet down to earnings per share and jeopardize the dividend. Campbell’s may hit this wall sooner than they realize.

By the way their long term debt is up $250 million. Dividend yield is around 3.2%.