The food service industry has undergone remarkable changes in recent years, primarily fueled by digitalization and evolving consumer demands. As we step into 2024, it promises to be a pivotal year for transformation and innovation in this sector. New technologies and trends are creating exciting opportunities for growth.

In this dynamic environment, investing in fundamentally robust food stocks PepsiCo, Inc. (PEP), General Mills, Inc. (GIS) and Archer-Daniels-Midland Company (ADM) appears to be a prudent decision. These companies exhibit resilience and pay consistent dividends, offering investors both stability and potential growth amidst the shifting tides of the food industry.

As technology relentlessly advances, it emerges as a key driver for the food service sector. The integration of mobile payments, online ordering systems, and smart kitchen equipment is enhancing operational efficiency while significantly elevating the customer experience.

However, the future of food systems also hinges on adopting sustainable agricultural practices to combat water scarcity and climate change effectively. Rapid advancements in artificial intelligence (AI) and data analytics are empowering farmers to make informed decisions regarding resource allocation.

This technological evolution enhances yields while minimizing environmental impacts. By embracing such technologies, the industry is paving the way for a more sustainable future.

Moreover, as the demand for healthy eating escalates, catering companies are reimagining their menu designs to align with this growing trend. The rising popularity of low-sugar, low-fat, organic, and plant-based foods is catering to consumer health needs and also opening new markets for businesses eager to adapt to changing preferences.

Additionally, the surge in online shopping has profoundly impacted the food and beverage landscape. The percentage of food and beverage sales within total retail e-commerce has climbed from 9.3% in 2017 to nearly 16% in 2023, with projections suggesting it will reach 21.5% by 2027.

According to Mordor Intelligence, the United States food service market is on track to reach $1.37 trillion by 2029, showcasing a CAGR of 10.74%. Now, let’s take a closer look at the fundamentals of the three food stocks, beginning with #3. These stocks pay regular dividends and could offer stability through a consistent and growing income stream.

Stock #3: PepsiCo, Inc. (PEP)

PEP is a beverage and food company with segments including Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia (AMESA); and Asia Pacific, Australia and New Zealand and China Region (APAC). Its brands include Lays, Doritos, and Cheetos.

On October 1, PEP announced the completion of a definitive agreement to acquire Garza Food Ventures LLC, dba Siete Foods, a Mexican-American food brand, for a total transaction value of $1.2 billion. As PEP expands its multicultural portfolio, it is set to benefit from catering to a larger population and increase its growth prospects.

On July 25, PEP announced a quarterly dividend of $1.355 per share, marking a 7% increase compared to the same period last year. This reflects PEP’s commitment to rewarding shareholders. The dividend was payable on September 30, 2024, to shareholders of record as of September 6, 2024.

PEP has increased its dividends for 51 consecutive years. It pays an annual dividend of $5.42, which translates to a 3.11% yield at the current price level. The stock’s dividend payouts have increased at a CAGR of 7.7% over the past three years. Moreover, its four-year average dividend yield is 2.74%.

PEP’s net revenue for the fiscal third quarter, which ended September 7, 2024, came in at $23.32 billion. Its non-GAAP operating profit increased 3.6% year-over-year to $4.18 billion. Moreover, non-GAAP net income attributable to PEP came in at $3.19 billion or $2.31 per share, up 2.6% and 2.7% from the prior year’s period, respectively.

Analysts expect PEP’s revenue for the fiscal fourth quarter (ending December 2024) to marginally increase year-over-year to $27.98 billion. Its EPS for the ongoing quarter is expected to grow 9.4% year-over-year to $1.95. Furthermore, PEP surpassed the consensus EPS in each of the trailing four quarters, which is impressive.

PEP’s stock has surged 4.2% over the past six months and 8.3% over the past year to close the last trading session at $174.48.

PEP’s POWR Ratings reflect its robust outlook. It has an A grade for Quality and a B for Growth. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

PEP is ranked #11 in the B-rated 33-stock Beverages industry. Beyond what is stated above, we have also rated PEP for Sentiment, Stability, Momentum, and Value. Get all PEP ratings here.

Stock #2: General Mills, Inc. (GIS)

GIS is a global manufacturer of branded consumer foods with over 100 brands in 100 countries. Its offerings include cereals, yogurt, frozen meals, snacks, pet food, and ice cream parlors. The company operates through North America Retail; International; Pet; and North America Foodservice segments.

On September 12, GIS announced a definitive agreement to sell its North American Yogurt business to Lactalis and Sodiaal, two leading French dairy companies, for a total transaction cost of $2.1 billion. This would allow GIS to refocus on global platforms and local gem brands, aiming for stronger growth prospects and improved margins.

On September 24, GIS announced a quarterly dividend of $0.60 per share, payable November 1, 2024, to shareholders of record as of October 10, 2024. Impressively, GIS has maintained an uninterrupted dividend payment streak for 126 years, reflecting its long-term financial stability.

Furthermore, GIS has raised its dividends for five consecutive years, paying an annual dividend of $2.40, which translates to a 3.38% yield at the current price level. Its dividend payouts have grown at a CAGR of 5.3% over the past three years, while its four-year average dividend yield is 3.15%.

For the fiscal 2025 first quarter, which ended on August 25, 2024, GIS reported net sales of $4.85 billion. Its adjusted operating profit reached $865.30 million. Moreover, adjusted net earnings attributable to GIS were $605.90 million, or $1.07 per share.

As of August 25, 2024, the company’s cash and cash equivalents rose to $468.10 million, up from $418 million on May 26, 2024.

Street expects GIS’ revenue for the fiscal year ending May 2026 to marginally increase year-over-year to $19.97 billion. Its EPS for the same period is expected to grow 4.1% from the prior year to $4.70. In addition, GIS surpassed the consensus EPS in all four trailing quarters.

Shares of GIS have surged 4.7% over the past six months and 12.3% over the past year to close the last trading session at $71.

GIS’ fundamentals are reflected in its POWR Ratings. The stock has a B grade for Quality. It is ranked #40 out of 74 stocks in the A-rated Food Makers industry.

Click here for the additional POWR Ratings for Value, Sentiment, Growth, Momentum, and Stability for GIS.

Stock #1: Archer-Daniels-Midland Company (ADM)

ADM focuses on human and animal nutrition as an agricultural supply chain manager and processor. It transports, stores, processes, and merchandises agricultural commodities, ingredients, flavors, and solutions. The company operates through three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition.

On August 19, ADM announced a joint venture with Farmers Business Network, a digital marketplace and farmer-to-farmer network called Gradable. The collaboration aims to empower more farmers and buyers to engage with grain produced through sustainable and regenerative practices, enhancing the company’s reputation in the industry.

On August 7, ADM declared a cash dividend of $0.50 per share on its common stock, which was payable on September 11, 2024, to shareholders of record as of August 21, 2024. Notably, ADM has consistently paid dividends for 92 consecutive years, highlighting its commitment to shareholders.

Plus, ADM has raised its dividends for 30 consecutive years, currently offering an annual dividend of $2, which equates to a 3.43% yield at the current price level. Furthermore, its dividend payouts have grown at a CAGR of 9.9% over the past three years, with a four-year average dividend yield of 2.40%.

ADM generated $22.25 billion in revenues for the fiscal 2024 second quarter, which ended on June 30. In addition, the company reported a gross profit of $1.40 billion and achieved adjusted net earnings of $508 million, or $1.03 per share, during the period.

The consensus revenue estimate of $90.05 billion for the fiscal year ending December 2025 reflects a rise of 2.3% year-over-year. Its EPS for the same period is expected to increase 1.7% year-over-year to $5.34.

Over the past five days, shares of ADM have surged 1% to close the last trading session at $58.29.

ADM’s POWR Ratings reflect its fundamentals. The stock has a B grade for Value. It is ranked #12 out of 23 stocks in the Agriculture industry.

To access ADM’s Momentum, Quality, Growth, Stability, and Sentiment ratings, click here.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

PEP shares were unchanged in premarket trading Thursday. Year-to-date, PEP has gained 5.13%, versus a 23.66% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

More...