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Three Candy Stocks With Breakout Potential Ahead of Halloween

Last Updated September 23, 2020 1:07 PM
W. E. Messamore
Last Updated September 23, 2020 1:07 PM

Investors on the prowl for a dividend-paying income stock in a company with a respected brand, solid management and strong fundamentals needn’t look any further than what Halloween has to offer. These three candy stocks might make a welcomed addition to your stock portfolio just in time for the holiday: The Hershey Company, Tootsie Roll Industries, and Rocky Mountain Chocolate Factory.

1. One Hot Candy Stock: The Hershey Company (NYSE: HSY)

On Jun. 12, Jim Cramer said:

“The company’s relatively new management team has been executing a very smart turn around plan for the past couple years, and their moves have been paying off… I salute CEO Michele Buck for masterminding this tremendous turnaround”

The Hershey Company was founded 125 years ago in 1894. Just last month its stock price reached an all-time high of $161.40 on Sept. 4. The Pennsylvania chocolate company creates some of the world’s most iconic and beloved candy brands like Hershey’s chocolate bars, Almond Joy, Kit Kat bars and Reese’s Peanut Butter Cups. A Monmouth University poll published this week found that Reese’s cups are by far America’s favorite Halloween candy .

Hershey stock has a market cap of $32.55B , a PE ratio of 27.37 , and pays a quarterly dividend with a more than 2% yield . Hershey’s shares have soared this year after the chocolate company improved its bottom line by 18%  while the rest of the industry declined by 24%. Buying Hershey stock is investing in extraordinarily good management.

2. Tootsie Roll Industries, Inc. (NYSE: TR)

Tootsie Roll Industries is another iconic and historic candy brand founded two years after the Hershey Company in 1896. Every October you’ll find a number of Tootsie Roll products scattered in the Halloween candy mix. Most famous among them: Tootsie Rolls, Tootsie Pops, Dots, Charms Blow Pops, Caramel Apple Pops and Junior Mints.

What you’ll almost never find is any Wall Street analyst commentary about Tootsie Roll stock. But the candy company’s shares have been quietly generating quarterly dividends with a yield around 1%  for decades. It’s definitely not a growth stock, but it is a low-risk income stock. The company is one of only 20 that have increased dividends every year for the past 50 years.

Tootsie consistently generates steady free cash flow , and it has a cash-rich balance sheet with a cash ratio of 3.04 . So it would take a lot of licks to get to the center of that Tootsie pop. Tootsie Roll shares closed out this week at a price of $35.90. That’s up 7.49% from its stock price of $28.41 a year ago, but down 1.56 for the day.

3. Rocky Mountain Chocolate Factory (NASDAQ: RMCF)

You may or may not have heard of Rocky Mountain Chocolate Factory. It’s not an iconic candy brand like the other two candy stocks on this list. But it has 360 locations worldwide that sell chocolate candies and confections made with its own propriety recipes. Founded in 1981, the company went public four years later.

In terms of other candy stocks, RMCF is one that frequently pops up. Its product offerings feature pumpkin spice espresso beans, candied apples, boxed chocolates and hand-made fudge. Not only is Rocky Mountain Chocolate Factory high-brow candy, its dividend is high-yield.

Shares closed out the week at $9.40. With quarterly dividend payouts of $0.12 since 2015, RMCF offers an eye-popping 5.1% dividend yield . The chocolate company has a solid balance sheet as well, with $5.3M cash on hand, $26.9M total assets, and total current liabilities of $4.7M .

Disclaimer: The above should not be considered trading advice from CCN.com.