The J. M. Smucker Co. SJM announced plans to acquire Hostess Brands TWNK for $34.25 per share, implying a total enterprise value of $5.6 billion.
Hostess, founded in 1930, has been through two Chapter 11 bankruptcies. The company was bought out of liquidation a decade ago by two investment companies and then returned to the public market in 2016 with the ticker TWNK.
With Smucker announcing the acquisition of Hostess Brands, some investors may be eyeing potential gains from the company’s dividends. As of now, Smucker has a dividend yield of 3.22%, which is a quarterly dividend amount of $1.06 a share ($4.24 a year).
To figure out how to earn $500 monthly from Smucker dividends, we start with a yearly target of $6,000 ($500 x 12 months).
Next, we take this amount and divide it by Smucker’s $4.24 dividend: $6,000 / $4.24 = 1,415 shares
So, an investor would need to own approximately $186,299 worth of Smucker, or 1,415 shares to generate a monthly dividend income of $500.
Assuming a more conservative goal of $100 monthly ($1,200 annually), we do the same calculation: $1,200 / 4.24 = 283 shares, or $37,260 to generate a monthly dividend income of $100.
Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.
The dividend yield is calculated by dividing the annual dividend payment by the current stock price. As the stock price changes, the dividend yield will also change.
For example, if a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price increases to $60, the dividend yield would decrease to 3.33% ($2/$60).
Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).
Further, the dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.
SJM Price Action: Shares of Smucker fell 7% to close at $131.66 on Monday.
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