McCormick & Company (NYSE: MKC) has seen its share price fall 32% this year, creating what some investors believe is a compelling entry point into a high-quality business.
The stock now yields 4.1%, which comfortably exceeds the FTSE 100 average yield of 3.1% by a meaningful margin.
What makes that yield even more striking is that McCormick is not a UK-listed company but a US-listed S&P 500 constituent, where the average dividend yield sits at just 1.1%.
McCormick has paid dividends annually for more than a century and has raised its dividend per share every year for 40 consecutive years.
Best known in the UK for its Schwartz brand of seasonings, McCormick is a multinational food ingredients company that also trades under its own name across many global markets.
The company occupies a unique market position in the packaged spices category, where supermarkets typically stock only one or two branded providers alongside their own-label products.
With its economies of scale, long expertise, buying networks and blending capabilities, McCormick commands strong pricing power as market leader in a category that would be difficult for rivals to disrupt.
Despite that durable competitive position, the stock currently trades at less than eight times earnings, reflecting investor concerns about weakening consumer spending and rising ingredient costs.
However, those fears have not yet materialised in the financial results, with both revenue and earnings rising sharply year-on-year in the first quarter of the latest reporting period.
A further source of uncertainty for investors is McCormick’s planned combination with Unilever’s food business, which would create a larger but differently positioned company still carrying the McCormick name.
The logic behind the deal centres on gaining greater distribution muscle, though some observers worry it could dilute the focused spice and flavouring business model that has historically defined the company’s investment appeal.
Adding a broader range of food brands to the portfolio risks complicating a business model that has thrived precisely because of its specialised and difficult-to-replicate market position.
Nevertheless, the underlying business remains strong, and the current share price appears to undervalue McCormick regardless of whether the Unilever deal ultimately delivers on its stated ambitions.
For long-term dividend investors seeking exposure to a century-old business with genuine pricing power, the current valuation and yield combination makes McCormick worth serious consideration.