Hormel Has Holders, Too

In his April 2 Labor column (“Hormel Union Dissidents Pick Bad Time for Good Fight,” Harry Bernstein says: “Several non-union firms now pay their workers $6 an hour or less, and even though Hormel still is making a profit ($38 million last year), the firm says it must have more labor cost reductions to remain in the black.”

Bernstein theorizes that because Hormel was making a profit it should be able to pay higher wages. A bit of research would have revealed that the February, 1986, Standard & Poor’s Stock Guide states that Hormel had 19,213,000 shares outstanding. On April 1, 1986, Hormel closed on the NYSE at $30.50 a share, giving Hormel a market value of about $580 million. Hormel currently pays an annual dividend of 56 cents a share, a yield of 1.86%. In addition, the $38 million annual earnings represent about a 6% return on current market value.

A 1.86% yield in today’s financial world is hardly spectacular, and a 6% return on market value will hardly set Wall Street afire. In fact, it may not be enough to keep the company viable in the long run. Where do the shareholders come into Bernstein’s thinking?

WILLIAM CLAYTON JR.

El Monte