Hershey's Dividend Is Growing Again — the Raise Is Small, and That Says Something Good

For an income investor, the dividend news out of Hershey this year deserves a careful read. After roughly two years of holding its payout frozen — the first time in a long memory the chocolate maker passed on its annual raise — the board finally grew the dividend again in February 2026. The instinct is relief. But the useful question is the one this writer always asks: is the raise earned, or is it a streak-saving gesture that puts the payout ahead of the cash flow that funds it?

Here is the sequence that matters. In February 2024, Hershey raised its quarterly dividend 15% to $1.37, an annual run rate near $5.48. Then came the cocoa shock. Raw cocoa prices tripled in the space of a year, and tariffs piled on top, and the company's bottom line took it directly: full-year 2025 adjusted earnings per share fell about 33% to $6.31, and fourth-quarter net income dropped roughly 60%. So Hershey did something it had not done in years — it held the dividend flat through all of 2025, quietly ending a 15-year streak of annual increases. It chose to protect the payout rather than play to the crowd. That is the move of a board that takes the income promise seriously.

When the raise finally came in February 2026, it was deliberately modest: the quarterly payout went to $1.452, lifting the annual dividend from $5.48 to $5.81, an increase of roughly 6%. Against the raises Hershey once delivered — that 15% jump in 2024 — this is a small step. That smallness is itself the signal. A management team that had just been through a cocoa crisis did not want to promise a recovery in dividends before the recovery in earnings had shown up. Resuming growth at a pace it can clearly cover is how a well-run dividend company rebuilds trust.

Now the tension that usually decides whether a resumed dividend is durable. On an earnings basis, Hershey's payout still looks stretched: the new $5.81 annual dividend equals roughly 90% of last year's adjusted earnings. That number looks scary until you remember the denominator was crushed by commodity costs. The cleaner test for a dividend is cash flow, and that is where the case reads differently. Hershey generated about $2.2 billion in free cash flow over the trailing twelve months, up more than 40% year over year, against roughly $1.1 billion of dividends it expects to pay this year — coverage of about two times. The payout is well funded by the cash the business actually produces, even while earnings are still recovering.

What makes the board's confidence believable is where cocoa has gone since. Cocoa spot prices have crashed roughly 74% from their December 2024 peak of more than $12,000 a ton, and while it takes time for lower input costs to show up in the income statement, the company has guided to a strong 2026 with improving earnings visibility. Cheap cocoa does not arrive instantly in a chocolate-maker's margins — cocoa is procured and hedged on long lead times — but the direction of travel favors Hershey, and the payout, not against it.

For a diversified income portfolio, what does this change? The lesson is not that Hershey is suddenly a growth story; a low-single-digit raise on a roughly 3.3% yield is a maintenance move, not a promise of compounding. The practical meaning is confirmation. A company can survive a commodity shock either by cutting its dividend or by holding it flat and then growing it modestly once the storm passes. Hershey chose the second path, and the cash flow supports it. For an income machine that needs resilient tenants in the packaged-foods room, that is worth more than a bigger number on the first page of the press release.

The condition that would change the view is straightforward: if cocoa's decline does not translate into recovering earnings as 2026 unfolds, and the annual dividend keeps sitting near or above the earnings line, then the resumed raise becomes a freeze waiting to fail and this becomes a different article. Watch the payout ratio roll over as costs ease. If coverage improves on both the earnings and the cash basis, the freeze is over for good — and a retired investor who simply collected the income through the scare has earned the right to be glad they stayed.