My Top Dividend Stock To Buy In April
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What a chaotic month (and year, for that matter) it’s been for the stock market.
Between the conflict in the Middle East, continued uncertainty around AI, and reignited concerns about inflation and potential rate hikes, there’s been no shortage of reasons for share prices to come down.
The silver lining (as you likely already know) is that lower share prices are more favorable for buying stocks, allowing your investment dollars to stretch further. At the same time, those lower prices allow you to lock in higher dividend yields, meaning you can generate more cash flow from the money you invest.
There are many reasons why lower prices are a good thing for buy-and-hold investors like ourselves, and there are quite a few interesting opportunities starting to show up right now.
One of which can be found in a stock I recently came across that I had honestly never looked at before. And the only reason this stock even showed up on my radar is because it was just added to SCHD during its latest reconstitution.
That stock is The Marzetti Company (MZTI), which is my top dividend stock to buy in April. You can learn about some of my other top stock picks here.
Now at first glance, Marzetti isn’t exactly the kind of business people jump out of their seats for. It’s a consumer staples company that makes things like salad dressings, sauces, dips, and frozen breads.
When I dug into the company a bit more though, I realized this is actually a pretty interesting business.
One of the things that stood out to me was the fact that Marzetti has licensing agreements with a handful of major restaurant chains. So when you walk into a grocery store and see things like Chick-fil-A sauces, Buffalo Wild Wings sauces, Olive Garden dressings, Arby’s sauces, or even products tied to brands like Subway or Texas Roadhouse, Marzetti is the company behind it.
Consumer staples products, in general, are things people tend to buy over and over again without really thinking about it. That consistency is one of the main draws of investing in these types of businesses.
What makes Marzetti a bit more interesting, though, is that this consistent behavior is paired with highly recognizable, very popular restaurant brands.
For example, Chick-fil-A has its fair share of fanatics. I can tell you right now that in my household, we’ve got Chick-fil-A sauces sitting in our fridge, and it’s not a purchase we ever debate.
We just buy it, and we definitely notice when we don’t have any.
What’s interesting, though, is that despite the durability of this business, the share price has been getting hit pretty hard recently. Over the past month, it’s down around 14%, and it’s sitting right near its 52-week low.
Zoom out a bit further and MZTI is down closer to 20% over the past year. So naturally, that raises the question: What’s going on?
From what I can tell, one of the biggest catalysts comes down to a recent acquisition. The company ended up buying a fast-growing and very popular sauce brand called Bachan’s, which strategically seems like a solid move.
Bachan’s has built a very strong following, and from what I’ve seen, people really love the product. My neighbors are actually obsessed with this stuff, as I recently found out when we were over at their house for dinner.
The issue is that Marzetti paid roughly four to five times sales for Bachan’s, which is pretty expensive for a food company. Whenever you see a deal like that, it’s not uncommon for the share price to react negatively, at least in the short term.
On top of that, there’s also some macro pressure. It’s a lot of the same stuff that’s impacting share prices everywhere else.
Oil prices have been moving higher, and that tends to ripple through the entire economy. Higher energy costs increase expenses across the board, and for a company like this, that can put pressure on margins.
Still, when you look at the business itself, it’s been pretty steady. Very much what you’d expect from a consumer staples company.
Revenue has grown at about a 7% annual rate over the past few years, earnings per share have grown around 4%, and free cash flow has actually accelerated over that same period.
Not to mention, the Marzetti Company has no net debt on its balance sheet. They’re actually sitting on a net cash position, which is one of my favorite things to see.
Getting into the dividend stats, right now you can lock in a 2.8% yield with MZTI, which is a lot higher than the company’s five-year average yield of about 2%.
Plus, the dividend growth has been moderate at about 6% per year and they have a very extensive dividend growth streak of 60+ years, making them a Dividend King.
All in all, the Marzetti Company seems like a pretty interesting opportunity right now, but it isn’t the only good buying opportunity out there.
There are quite a few other stocks worth paying attention to, and I want to hear from you: Which discounted stocks do you have your eye on now that we’ve arrived in April? Write to me here and let me know.
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“What app would you recommend for someone just getting started with investing? And what advice would you give to an 18-year-old starting out?"
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To be honest, there isn’t one specific platform I’d recommend. Most brokerages do more or less the same thing, so I’d just go with the one that feels the most intuitive for you to use. Personally, I use both Charles Schwab and Public and have been very happy with both.
Now for someone just getting started with investing (at any age), I think it's best to keep things as simple as possible and start with ETFs. They’re straightforward, hands-off, and will give you broad diversification without having to figure out which individual stocks to buy.
Something like the S&P 500 (through VOO or SPYM) is a great place to start, or you could go with a total market fund like VTI. You really can’t go wrong either way.
With that said, what I wouldn’t do is overcomplicate things right out of the gate. I know how tempting it is to jump into stock picking right away, but I think you'll be better off keeping it simple at the start.
You can always complicate things later on as you get farther down the road in your investing journey.
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