3 Scrumptious Chocolate Stocks to Buy on World Chocolate Day

Billy Toh

July 4, 2022

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Every year on the 7th of July, World Chocolate Day is celebrated around the world as chocolate lovers come together to indulge in their favourite treat.

As one of the most famous treats on the planet with global annual sales of around US$150 billion, investors ought to pay attention to the leader chocolate-producing companies in the world.

The industry is also dominated by a handful of food conglomerates and while growth is moderate, these chocolates stocks offer stable growth and sustainable income for investors, mainly via dividends.

So, to celebrate World Chocolate Day, here are three of the leading global chocolate stocks.

1. Hershey

The Hershey Company (NYSE: HSY) is a US-based chocolatier that owns some of the most popular brand names such as Hershey’s, Reese’s and barkTHINS.

In the Q1 FY2022, the Group posted net sales of US$2.7 billion, an increase of 16.1% while organic sales growth increased by 11.5%.

The growth was also driven by the acquisition of Pretzels, Dot’s and Lily’s.

Gross margin came in at 46.7% during the quarter as compared to 45.7% in the corresponding quarter a year ago.

In terms of its business segment, Hershey’s North America Confectionary sales grew by 11.7% to US$2.2 billion in Q1 FY2022.

Excluding seasonal products, demand for Hershey’s confectionary products remained strong with retail sales growth of 8.1%.

Meanwhile, take-home chocolate sales and accelerating sales of Jolly Rancher and Twizzlers products drove strong growth during the quarter.

Hershey is a rare winner so far this year as share price has increased by 14.2% year-to-date to close at US$221 per share.

Hershey also offers sustainable dividend as a reward to their shareholders, making investing an even sweeter experience.

Currently, the stock’s forward dividend yield stands at 1.6% and the company has already maintained its dividend growth for 13 consecutive years.

With a dividend payout ratio of just 45.0%, it also offers the safety net for investors looking for protection during the current volatile market.

2. Mondelez International

Mondelez International Inc (NASDAQ: MDLZ) is an American multinational food and confectionary company that has annual revenue of around US$26 billion.

The Group also recorded a strong performance during the Q1 FY2022 as net revenue jumped by 7.3% to US$7.8 billion, driven by organic net revenue growth of 8.6%.

Despite the strong revenue growth, operating income was affected by the war in Ukraine, among other issues.

However, it continues to reward shareholders with US$1.2 billion being returned in the form of cash dividends and share repurchases.

Historically, Mondelez International has a good dividend track record with eight consecutive years of dividend growth.

The Group’s five-year dividend growth rate stands at 13.0% and its forward dividend yield is currently 2.2%.

This is based on its payout ratio of 46.8%, which is easily sustainable over the long term.

For FY2022, Mondelez International expects its free cash flow to remain at around US$3 billion, and above, despite the challenging business operating environment.

3. Nestle

Nestle SA (SWX: NESN) is one of the largest food companies in the world and has several chocolate and baked goods brands.

As the food empire and top chocolatier in the world, Nestle sells various sweets under its household brand name and has rights in other brands such as Milky Way and KitKat.

It is a top company that has a resilient business model with a focus on consumer staples.

While growth is slow for the food conglomerate, Nestle has a strong dividend track record.

Nestle increased its dividend for the 27th year in a row in 2021 and has also been embarking on share buyback programmes in recent years in order to reward shareholders.

The payout ratio for its dividend (in 2021) is 46.2%.

At its current level, the company’s forward dividend yield stood at 2.5%, which will be important for investors looking at some stability.

Buy chocolate producers for dividend safety

The resilient business models of chocolatiers have made them a good investment amid the current volatile market.

So, while you’re eating your favourite chocolate on World Chocolate Day, let us protect our portfolio by investing into some of these leading chocolate producers as well.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

About the Author: Billy Toh

Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.