Disastrous Takeover Leaves a Sour Taste, but 4.17% Yield Makes this Snack Food Titan Hard to Ignore

The J.M. Smucker Company (NYSE: SJM) may have bitten off more than it can chew with its $5.6 billion acquisition of Hostess, but it’s still a sweet treat for dividend-focused investors. 

SJM’s purchase of Hostess seemed promising on paper, but has left a bitter aftertaste as costs have spiraled and sales have declined across its Sweet Baked Goods portfolio.

That, along with rising input costs and weak volumes in packaged food, has all piled on pressure.

Unlike some of its most beloved creations, there’s no sugar-coating recent performance.

The 127-year-old company behind Jif, Folgers, and Smucker’s jelly has been in the trenches for months, with shares down 10.42% over the past year. 

Don’t let those headline stats sway your decision-making. 

If you’re a dividend investor, the 4.2% dividend yield, a 28-year unbroken run of increases, and a strong track record of distributions are more than enough to qualify J.M. Smucker for a place on your watchlist. 

Growth-focused investors likely won’t be swayed, and that’s fair given the fallout from the Hostess deal, and stuttering sales (more on those two considerations below).

But if you’re a value hunter in the market for a steady passive income, SJM trades at just 11.4x forward earnings.

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Operational Overview and Recent Earnings

The J.M. Smucker Co. was established more than 125 years ago.

It has evolved into a leading consumer packaged goods company offering a diverse range of tasty, convenient snacks and food products.

Its portfolio spans cat and dog food, coffee, jams and spreads, frozen handheld goods, and baked sweet treats. 

The five-generation family firm now employs more than 9,000 people and has used acquisitions as its primary tool for expansion to considerable effect.

For the 2025 fiscal year, the company reported free cash flow of $817 million and net sales of $8.7 billion, an increase of 7%.  

A closer look at the figures reveals a 1% decrease in net sales, driven by a decline in demand for dog snacks and sweet baked goods, as well as a 10% decrease in net profit.

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Dividend Profile

Within the last week, Smucker announced it would pay a quarterly dividend of $1.06 per share (equivalent to a 2% increase), putting the forward yield at over 4%.

This isn’t a stretch either: the payout ratio sits around 43%, suggesting financial prudence and plenty of room for continuation, even in a tight consumer environment. 

This dividend lift is the latest in an almost three-decade streak, meaning long-term value is baked right in.

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Outlook

The Fiscal year 2025 saw a strengthening in the firm’s financial position with growth in adjusted earnings per share and free cash flow.

The CEO, Mark Smucker, also highlighted investment within the business and positive steps forward in paying down debt and returning cash to shareholders through dividends in his comments on the Fiscal Year 2025 Fourth Quarter Results.

The outlook for the 2026 fiscal year follows a similar pattern, with Smucker saying the company is confident in its strategy and remains well-positioned to deliver long-term growth and increase shareholder value.

Our take? This is a solid business negotiating a complex integration of another company into its own offerings, in a challenging consumer environment.

Problems with the Hostess acquisition aside, there are positive moves to cut debt and re-focus on core products.

With a family of long-established brands complemented by new launches and a target of growing sales by 2%-4% in the 2026 fiscal year, it would be a mistake to write off this family favorite.

Bear Case

It’s becoming increasingly clear that Smucker overpaid in its eagerness to add Hostess brands, such as Twinkies, to its portfolio.

Failure to overcome integration challenges promptly could lead to further instability.

A Sweet Treat For Long-Term Investors

J.M. Smucker isn’t going to make anyone’s “Top 10 Growth Stocks of 2025” list. We’ve seen this confirmed in last month’s earnings release.

They figures are solid, without setting the world on fire. But that’s the secret sauce that makes this stock well worth considering.

This is a legacy food company in transition and it’s working smartly behind the scenes to reshape its portfolio while continuing to throw off predictable cash.

The 2023 acquisition of Hostess Brands was controversial, largely because of the $5.6 billion price tag.

Smucker took on debt, prompting concerns about balance sheet strength.

But here’s what the bears missed: Hostess brings in high-margin snack brands like Twinkies and Ding Dongs, giving Smucker much-needed exposure to faster-growing convenience categories.

More importantly, management is targeting $100 million in annual cost synergies by year three.

If they can deliver, free cash flow could move meaningfully higher by 2026, right when interest rates may start to drop again.

Adding Smucker’s moves to divest slower-growth pet food brands and focus more tightly on snacking and coffee, the longer-term picture starts to look more compelling than the market currently acknowledges.

This isn’t a short-term play, but three years from now, income investors may look back and wish they’d bought when sentiment was this negative.