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Dividend Champion Spotlight: Tootsie Roll Industries, Inc.

Published Thu, 06 Dec 2018 23:08:24 -0500 on Seeking Alpha

There is a famous story about one of Warren Buffett's early investments in a candy company called See's Candies. Buffett lauded the candy company for its economically resilient product offerings that produced strong cash flows. The story is an illustration of how effective a model the confectionary business can be. Today's Dividend Champion spotlight touches on Tootsie Roll Industries Inc. (TR), whose classic candies have fueled 52 years of consecutive dividend raises. However, the sweet nature of the industry doesn't guarantee investment results. Tootsie Roll Industries suffers from questionable management and performance metrics that should give investors pause before biting into this nostalgic classic.

Tootsie Roll Industries manufactures and sells confectionary goods. The company was founded in 1896, and is headquartered in Chicago, IL. It is behind a number of all-time classic brands, including Tootsie Roll candies and Pops, Charleston Chew, Blow Pop, Andes, Dubble Bubble, Dots, and Charms. The company generates more than $500 million in annual sales, the vast majority of which are from the US. It does about $40 million in Canada, Mexico, and other foreign markets.
Financial Performance

(Source: YCharts)
The company's sales peaked in 2013, and have since slowly declined. For the trailing 10-year period, revenue growth is roughly flat at a CAGR of 0.43%. Earnings per share have grown at a CAGR of 6.23% over the same time period.... Read more