Financial Survey: Dean Foods (DF) & Lancaster Colony (LANC)

Dean Foods (NYSE: DF) and Lancaster Colony (NASDAQ:LANC) are both consumer staples companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, valuation, risk, earnings, profitability, institutional ownership and analyst recommendations.

Analyst Ratings

This is a summary of current ratings for Dean Foods and Lancaster Colony, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dean Foods 2 7 2 0 2.00
Lancaster Colony 0 0 3 0 3.00

Dean Foods presently has a consensus target price of $12.06, suggesting a potential upside of 45.07%. Lancaster Colony has a consensus target price of $153.00, suggesting a potential upside of 29.39%. Given Dean Foods’ higher possible upside, equities research analysts plainly believe Dean Foods is more favorable than Lancaster Colony.

Profitability

This table compares Dean Foods and Lancaster Colony’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dean Foods 0.79% 11.80% 2.90%
Lancaster Colony 9.84% 19.65% 15.67%

Dividends

Dean Foods pays an annual dividend of $0.36 per share and has a dividend yield of 4.3%. Lancaster Colony pays an annual dividend of $2.40 per share and has a dividend yield of 2.0%. Dean Foods pays out 53.7% of its earnings in the form of a dividend. Lancaster Colony pays out 55.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Dean Foods has increased its dividend for 55 consecutive years. Dean Foods is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Dean Foods and Lancaster Colony’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Dean Foods $7.80 billion 0.10 $61.58 million $0.67 12.40
Lancaster Colony $1.20 billion 2.70 $115.31 million $4.31 27.44

Lancaster Colony has lower revenue, but higher earnings than Dean Foods. Dean Foods is trading at a lower price-to-earnings ratio than Lancaster Colony, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

85.3% of Dean Foods shares are owned by institutional investors. Comparatively, 53.2% of Lancaster Colony shares are owned by institutional investors. 1.2% of Dean Foods shares are owned by company insiders. Comparatively, 31.9% of Lancaster Colony shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Dean Foods has a beta of 0.53, meaning that its share price is 47% less volatile than the S&P 500. Comparatively, Lancaster Colony has a beta of 1.05, meaning that its share price is 5% more volatile than the S&P 500.

Summary

Lancaster Colony beats Dean Foods on 11 of the 17 factors compared between the two stocks.

About Dean Foods

Dean Foods Company is a food and beverage company. The Company processes and distributes fluid milk, and other dairy and dairy case products in the United States. It is engaged in manufacturing, marketing, selling and distributing a range of branded and private label dairy and dairy case products. It offers branded and private label dairy case products, including fluid milk, ice cream, cultured dairy products, creamers, ice cream mix and other dairy products to retailers, distributors, foodservice outlets, educational institutions and governmental entities across the United States. It also offers juices, teas and bottled water. As of December 31, 2016, the Company had over 50 national, regional and local dairy brands, as well as private labels. As of December 31, 2016, the Company’s national, local and regional licensed brands included Alta Dena, Hygeia, PET, Arctic Splash, Jilbert, Pog, Barbers Dairy, Purity, Berkeley Farms, Land-O-Sun & design and ReadyLeaf, Broughton.

About Lancaster Colony

Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice channels. The Company’s food products include Salad dressings and sauces, Vegetable dips and fruit dips, Frozen garlic breads, Frozen Parkerhouse style yeast rolls and dinner rolls, Premium dry egg noodles, Frozen specialty noodles, Croutons and salad toppings, Flatbread wraps and pizza crusts, and Caviar. Its brands include Marzetti, Marzetti Simply Dressed, Cardini’s, Girard’s, Katherine’s Kitchen, New York BRAND Bakery, Mamma Bella’s, Sister Schubert’s, Mary B’s, Inn Maid, Amish Kitchen, Reames, Aunt Vi’s, Flatout and Romanoff. It manufactures and sells other products pursuant to brand license agreements, including Olive Garden dressing, Jack Daniel’s mustards and Hungry Girl flatbreads. A portion of its sales are dressing packets, frozen specialty noodles, pasta and flatbreads sold to industrial customers for use as ingredients or components in their products.

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