1 Dividend Growth Stock Down 35% to Buy Right Now.

Hershey's Dividend Yield and Valuation - Hershey's current dividend yield of 3.2% is near its highest level ever, significantly higher than the S&P 500's 1.2% and the average consumer staples company's 2.5% [1] - The stock appears historically cheap, with a 38% price decline from its peak, making it an attractive investment opportunity [7] - Over the past decade, Hershey's revenue grew at an annualized rate of 4.5%, while earnings per share increased by nearly 10% annually [7] - Management has increased the dividend at an annualized rate of 10% over the past decade, appealing to dividend growth investors [8] Challenges Facing Hershey - Cocoa prices have risen sharply due to supply-demand imbalances, leading to higher cost of goods sold inflation expected in 2025 [2][3] - The company has hedged its cocoa exposure for 2024, but these hedges will eventually roll off, exposing it to future price volatility [2] - The popularity of new weight loss drugs, which suppress appetite and promote healthier eating, poses a long-term threat to Hershey's top line [4] - These challenges have contributed to a selling mood among investors [5] Potential Mitigating Factors - Hershey has a history of managing commodity price volatility and is likely to adjust by increasing prices [9] - The company believes cocoa prices will normalize, with a potential surplus expected in 2025, though the market dislocation may take time to resolve [9] - The long-term impact of weight loss drugs may be limited, as studies show only about 50% of people adhere to long-term medication regimens [10] - Early-stage adverse effects of weight loss drugs, such as muscle loss, could limit their widespread adoption [11] Investment Opportunity - The current market sentiment presents a buying opportunity for long-term investors, as Hershey's challenges may be temporary and less severe than feared [12][13] - The company's strong historical performance and attractive dividend yield make it a compelling choice for dividend growth investors [13]