A good way to evaluate the prospects of meat substitute companies such as Beyond Meat (NASDAQ: BYND) is to examine meat producers such as Tyson Foods (NYSE: TSN).
Tyson Foods is making money it reported a quarterly gross profit of $1.139 billion on revenues of $10.884 billion on 30 September 2019. Plus, Tyson reported an operating income of $604 million and an income after tax of $372 million for the same quarter.
Tyson Foods’ business generates a lot of cash. The company reported an operating cash flow of $978 million for the quarter ending on 30 September 2019. Plus, there was an ending cash flow of $78 million on 30 September 2019.
Consequently, Tyson Foods ended the quarter with $484 million in cash and short-term investments and total assets of $33.097 billion. Given those numbers, I think Mr. Market fairly valued Tyson Foods at $89.86 on 20 January 2019.
Is Tyson Foods a Growth Stock?
Additionally, it appears meat is a growth business at Tyson. Stockrow estimates Tyson had a revenue growth rate of 8.85% for the quarter ending on 30 September 2019.
Tyson Foods is growing fast in a slowly expanding market. Statista projects annual US per capita meat consumption could grow from 216.82 pounds in 2017 to 224.12 pounds in 2028.
Importantly, Statista finds the most popular meat in the United States is Tyson’s signature product; boiler chicken. Statista predicts yearly per capita boiler chicken consumption in America will increase from 91 pounds in 2017 to 94.3 pounds in 2028.
Thus, Tyson Foods is a growing company in a growing business. In particular, Tyson concentrates on America’s meat of choice: boiler chicken. Statista estimates the average American cooks chicken at home twice a week and eats precooked chicken out once a week.
I think Tyson is well-positioned to take advantage of increased meat consumption. Tyson owns such brands as Tyson, Jimmy Dan, Hillshire Farm, Hillshire, BallPark, Aidells, State Fair, Nature Raised Farms, Sara Lee, Gallo Salame, Bonici, Wright, The Bruss Company, Boso’s Chairman’s Reserve, Lady Aster, Wunderbar, Supreme Tender Pork, Barber Foods, Star Ranch Angus, ipb, Advance Pierre Foods, Russer, Nudges, and Reuben.
Is Tyson Foods’ Growth Sustainable?
Thus Tyson could be a growth stock even with the rise of meat alternatives such as Beyond Meat. People are eating more meat, but anti-meat sentiment is growing.
Meat critics claim; for example, that livestock produces 25% of the greenhouse gas emissions, The New Food Economy notes. Meanwhile, anti-meat messaging is coming from “angle angles” nutritionist Diana Rodgers tells The New Food Economy.
There is a growing backlash against meat alternatives; such as Beyond Meat and the Impossible Burger, NBC notes. Moreover, there is a growing acceptance of veganism with popular vegan-only eateries and backlashes against vegan critics, Forbes contributor Janet Forgrieve reveals.
The number of Americans claiming to be vegan grew from 1% to 6% of the population between 2014 and 2017, Global Data estimates. Plus sales of plant-based alternatives grew by 17% in 2017 to $3.5 billion, the Good Food Institute and Nielsen claim. In fact, Forgrieve estimates 95% of American supermarkets sell plant-based meat alternatives.
Is Politics a Threat to Tyson Foods?
Thus, Tyson and other meat makers face an increasingly hostile political climate and new competitors.
Yes, meat producers are lucrative and influential. However, American brewers and distillers were powerful and wealthy industries in the early 1900s. That did not stop an activist minority from imposing Prohibition; a ban of most alcohol on the nation, in 1920.
I think prohibition of meat is improbable but in 1900 most Americans considered alcohol prohibition impossible. Just 20 years later in 1920, alcohol prohibition was the law of the land, enacted by a Constitutional Amendment.
Is Meat Prohibition Coming?
In the early 1900s, an intolerant and puritanical minority promoted alcohol prohibition on grounds of health and morality. Today, a similar minority promotes anti-meat sentiment for the same reasons.
Today’s puritans portray meat as evil and unhealthy, just as the Temperance Movement portrayed alcohol as evil and unhealthy. Likewise, they associated alcohol with unpopular minorities; such as German Americans and the Irish. a century ago. Today’s snobs associate meat with working-class whites, Muslims, Hispanics, and African Americans.
Meat Temperance is Coming
Plus, we associate veganism with an educated and upper-class lifestyle. In the early 1900s, they associated Temperance with a clean middle-class lifestyle.
They have not mentioned meat prohibition yet, but I think it is only a matter of time before somebody promotes the idea. Only time will tell if the idea gains political traction. Alcohol Prohibition elected three Republican presidents; Warren G. Harding (R-Ohio), Calvin Coolidge (R-Massachusetts), and Herbert Hoover (R-California) in the 1920s.
Thus Tyson Foods could face a political battle for survival. However, the political threat is theoretical, so Tyson could be a good investment now.
Is Tyson Foods a Good Dividend Stock?
I think Tyson Foods (NYSE: TSN) is a decent dividend stock. Tyson scheduled a 42₵ quarterly dividend for 27 February 2020.
That dividend grew from 37.5₵ on 29 August 2019 to 42₵ on 27 November 2019. Dividend.com reports Tyson’s dividend has grown for the last seven years.
Overall, Tyson shares offered a dividend yield of 1.87%, an annualized payout of $1.68, and a payout ratio of 24.77% on 20 January 2020. Thus, I consider Tyson a good dividend stock but not a value investment.
If you appreciate meat and dividends, Tyson is a good stock to investigate. However, this company could face ugly political currents that could destroy its business.