ConAgra Foods, Inc. (CAG)

Conagra (CAG) is a packaged food company. Perhaps the definition of a business model that doesn't depend on where we are in an economic cycle. CAG produces a number of brands you probably have in your kitchen, Chef Boyardee, Orville Redenbacher's, Hebrew National, Libby's, Blue Bonnet, LaChoy, Hunt's, Wesson and others. They also produce private label brands. I think that's a key element in a soft economy, people will still need groceries, but if the budget is tight, the private label brands are likely to find a place in the shopping basket over pricier name brands.

CAG sells at a forward PE of about 13. Analysts estimate 8.2% earnings growth going forward for the next five years, not stellar but respectable if the economy continues to weaken. The dividend yield based on the 28 Jan close is 3.5%, about the same as a 10-year treasury. The payout ratio of 44% leaves some cushion and room to raise the dividend going forward. The current stock price of $21.35 is near the bottom of its 52-week range. The company has a market cap of $10 billion, $128 million of cash on hand and $3.7 billion of debt. The debt level is higher than I'd like, but with solid earnings, the CFO should be able to find some ways to reduce interest expenses as the Fed continues to slash rates.

Risks include higher commodity prices that could be difficult to pass along to consumers. Although, my limited grocery shopping experience would indicate food companies are passing those costs along just fine. And, if we do tip into recession, lower oil prices would also bring lower food commodity prices since crop-based biofuels essentially link grain prices to energy prices.

This isn't a good choice for someone who's swinging for the fences. But, it shouldn't get hammered too badly if we continue into a bear market and the dividend yield should take some of the sting out of a tough market.