Kellogg slowing down dividend hikes 04/23 01:45 PM
SAN FRANCISCO (MarketWatch) -- Dividend growth at Kellogg Inc. is slowing as the world's largest cereal maker attempts to fix its business.
Kellogg increased its dividend 7% last year, following 9% growth each year since 2008. For 2012, the maker of Special K cereals and Cheez-It crackers plans to raise its annual dividend 4% to $1.74 a share. Kellogg has paid a dividend since 1925.
Divided-rate increases are abating as the company invests more cash into improving its factories, advertising and creating new snacks and cereals.
Kellogg pumped $1.1 billion into advertising last year, equating to 9% of its $13.2 billion in total sales. On that basis, the company was the biggest spender among large U.S. packaged-food makers.
Also, capital expenditures rose 25% to $540 million over 2010. These kinds of investments are estimated to rise this year.
Kellogg has struggled with tepid U.S. cereal sales and product recalls over the past couple of years, making investors uneasy.
The uphill climb continues. On Monday, Kellogg cut its 2012 sales and profit views. The company now expects earnings to be down 2% to 4% this year, rather than up 2% to 4%. Kellogg cited weak U.S. shipments, the faltering European economy and its decision to invest more money to aid future sales.
While Kellogg had signaled 2012 would be another transition year, investors were disappointed. Its shares fell 5% at $51.01 in the afternoon.
Kellogg's (K:$50.70,00$-3.29,00-6.09%) product-development investments show signs of heading in the right direction. Last year, the company got $800 million of sales from new products like Special K Cracker Chips and Eggo Thick & Fluffy waffles.
In terms of new food items on grocery shelves last year, Special K Cracker Chips ranked No. 7 in sales, according to SymphonyIRI Group, which collected register data at U.S. food retailers, excluding Wal-Mart.
For now, investors sticking with Kellogg await the payoff.
Kellogg shares, including dividend payments, are down 4% since April 2011, compared with the 5% gain for the S&P 500 Index over the same period.