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Tyson Foods Inc.TSNTOP PICKFeb 25, 2016Stock price when the opinion was issued
As of Jun 16, 2026. Market Open.
TSN pays a good yield of 4%, and management has grown its dividends nicely over the past 10 years. Sales growth is expected to be modest in the next few years (low single digits), and it generates a good level of operating cash flows. Its margins have contracted over the past 12 months, and it has missed on its five past earnings results. Its balance sheet is strong, with a good cash balance of $706M and an equity position of $18.9B. It has its strengths and operates in a defensive sector. We would be comfortable with this name for income, but we do not expect much in the way of growth in the near to intermediate term.
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In a volatile market and a slowing economy, it is usually consumer stocks that perform well, especially food stocks. She is betting that this stock will get re-rated. Hormel (HRL-N) is trading at 30X earnings, but is not expecting this one to get re-rated to that. This is currently at 16X and just reported a phenomenal quarter. Making acquisitions which diversifies away from their commodity products and getting more into branded products. Not only will the margins improve, but the predictability will also improve. Dividend yield of 0.9%.