Fresh Del Monte Produce’s Dividend Can’t Grow Without Bananas
Fresh Del Monte Produce (FDP) pays a dividend, but it hasn’t consistently grown its dividend. Future dividend growth is going to be a lot harder too if the Cavendish Banana is wiped out like the Gros Michel was.
In the 1950s the Gros Michel, the best selling Banana and the basis for all Banana flavorings, was wiped out by a fungal infection called Panama Disease.
Banana plantations survived through the cultivation of the Cavendish Banana. Now 50 years later a new strain of Panama Disease is spreading.
From The Washington Post.
Now, half a century later, a new strain of the disease is threatening the existence of the Cavendish, the banana that replaced the Gros Michel as the world’s top banana export, representing 99 percent of the market, along with a number of banana varieties produced and eaten locally around the world.
And there is no known way to stop it—or even contain it.
That’s the troubling conclusion of a new study published in PLOS Pathogens, which confirmed something many agricultural scientists have feared to be true: that dying banana plants in various parts of the world are suffering from the same exact thing: Tropical Race 4, a more potent mutation of the much feared Panama Disease.
Specifically, the researchers warn that the strain, which first began wreaking havoc in Southeast Asia some 50 years ago and has more recently spread to other parts of Asia, Africa, the Middle East, and Australia, will eventually make its way to Latin America, where the vast majority of the world’s banana exports are still grown. At this point, they say, it’s not a question of whether Tropical Race 4 will infiltrate the mothership of global banana production; it’s a matter of when. [emphasis added]
Banana sales generate 46% of FDP’s revenue and 30% of its operating profit. Losing the Cavendish Banana will be devastating to Fresh Del Monte Produce’s bottom line and FDP’s ability to increase future dividends.