Tyson Foods (NYSE: TSN) has certainly felt the impact of COVID-19, which has hurt production. The company has been facing headwinds such as supply struggles, pricing pressures amid weak restaurant sales and rising demand for meat substitutes. While recent results suggest that Tyson is dealing effectively with the issue and its operations are running more smoothly, rising COVID-19 cases may prove to be another setback. The stock was recently down more than 30% from its 52-week high – presenting a buying opportunity.
Tyson is one of the biggest processors and sellers of beef, pork and chicken, with brands such as Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair. Even in a bad economy, demand for its products remains stable.
Despite ongoing issues, Tyson’s results showed an improvement in its fiscal fourth quarter, with adjusted sales down by only 2% year over year as the virus continued to affect production – and operating profit jumping by 40% despite higher COVID-19-related expenses.
Showing confidence in its future, Tyson’s board of directors recently raised its quarterly dividend by 6%, and the stock yielded over 2.7%.
No one wants to see widespread shutdowns, but that’s a possibility with cases rising. Regardless, long-term Tyson investors can collect dividends while waiting for better times – and a rising stock price.
Ask the Fool
Q: What’s the difference between “fixed income” and “equity income” funds? – O.M., Binghamton, New York
A: They’re both mutual funds – or similarly structured exchange-traded funds, or ETFs, that aim to deliver income to shareholders.
A “fixed income” fund is typically invested in securities that pay out interest income on a reliable schedule – such as government or corporate bonds, certificates of deposit, known as CDs, and money market funds. The term “fixed income” is often used as a proxy for “bonds.” The term “equity” refers to stocks, so an “equity income” fund is one that aims to generate income from the dividends of stocks in which it’s invested.
Bonds have a reputation as being safer than stocks, and they can be less volatile, but they vary widely in their riskiness. U.S. Treasury bonds, backed by the federal government, are quite safe, while corporate bonds carry more risk (and thus higher interest rates). Junk bonds sport the highest interest rates – because they’re issued by risky companies. Over long periods, the stock market has usually outperformed bonds, so you may want to focus most or all of your long-term investment dollars on stocks.
Q: What does “OTC” refer to? – E.L., Forest Hills, Michigan
A: It’s an acronym for “over the counter,” and you’ll see it next to thousands of securities that don’t trade on a major exchange such as the New York Stock Exchange or Nasdaq. OTC stocks tend to be those of small companies that don’t meet listing requirements for an exchange, though some major international stocks can also be found in the OTC market. Over-the-counter stocks are traded via broker-dealer networks, by computer or by phone. Learn more at Fool.com/investing/stock-market/exchange/otc-markets.
My smartest investment
My smartest investment was buying shares of 3M. I knew it was a great company, and because I worked there, I got to buy my shares at a discount. – J.T., online
The Fool responds: It’s always smart to invest in companies you understand well, as they’re less likely to surprise you in a bad way. If you happen to work for a strong and growing company, and it offers an employee discount on shares, that’s great, too. Like many employers, 3M offers eligible workers a stock purchase plan, letting them regularly and automatically buy shares via payroll deductions.
The company’s website explains: “The price for shares purchased under the (plan) is fixed at the beginning of each month and represents a 15% discount from the closing trading price of a share of 3M stock on the first trading day of the month. Eligible employees generally may choose to contribute 3% to 10% of their eligible compensation.” That gives you roughly an immediate 15% gain on your investment!
A word of caution, though: It can be risky to have a lot of money riding on your employer’s stock – because you already rely on your employer for your living expenses.
If it were to fall on hard times, you might end up out of a job and find your portfolio shrunken as well. So spread your eggs across several baskets.
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