McCormick will raise dividend by 9 percent Firm optimistic about economy

December 21, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Buoyed by optimism about the economy, spice maker McCormick & Co. said yesterday it would raise its dividend 9 percent, to 12 cents a share from 11 cents.

The announcement came a month after the Sparks-based company said it had dropped plans to buy Germany's largest seasoning company and form a joint venture with CPC International Inc., the New Jersey maker of Skippy peanut butter and Knorr soups. Some analysts said the setback in Europe left the cash-rich company with extra money, part of which it is funneling back to shareholders.

"They've had some money freed up, so they can afford the dividend increase," said Mike Fineman, an analyst with Alex. Brown & Sons Inc.

Wall Street has been down on McCormick for much of this year as the company's earnings have not kept up with expectations. The nation's largest spice and seasonings producer had planned to grow 15 percent this year, but is on line for a 10 percent rate. McCormick's stock was down nearly 19 percent for the year as of yesterday.

Over the past couple of months, however, investors have started to buy the company's stock, betting that it would benefit from stronger economic growth in the United States, even if it will not grow as quickly in Europe as it might have with the acquisition.

The stock closed yesterday at $23.75, up 50 cents.

"A lot of people had a negative view of them after the deal in Europe fell through. The dividend [increase] shows they are confident that their growth rate will stay high," said Kurt Funderberg, an analyst with Ferris Baker Watts.

Mr. Funderberg also said the higher dividend is in line with company policy to increase the dividend in line with earnings. With earnings expected to increase about 10 percent this year, a 9 percent dividend increase was predictable, he said.

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