Dean Foods Is Now A Penny Stock So What Should Investors Do?
When consumer behavior changes in a particularly unexpected way, even industry leaders can find themselves in trouble. That is what seems to have happened with Dean Foods Co (DF Stock Report); now a penny stock. This is the biggest milk processor in the United States. Over the years, milk consumption among Americans has gone down at an alarming rate and hence, it is not a surprise that the fortunes of Dean Foods have dwindled accordingly.
A Problematic Situation For This Penny Stock?
The biggest milk processor in the US has been on the New York Stock Exchange for over twenty years. But now it is nothing more than a penny stock. In a new development, the stock is now trading at less than $1.
It is a problematic situation for Dean Foods since a sub $1 stock price could get delisted from the NYSE. Over the years, the company’s value has eroded significantly. Now it is valued at around $90 million. The troubles for Dean Foods have been compounded over recent years.
Following the move by leading grocery chains to sell their own brands, the company has had to operate at an average margin of as little as 3.8%. This has been going on for over the past half a decade. In addition to that, one of its most important customers, Walmart (WMT Stock Report) created its own milk processing operation. Of course, that led to even bigger losses in business for Dean Foods.
What’s Next For Dean Foods (DF) Stock?
Although the company had spoken about generating cash flow, DF stock price hasn’t recovered. It’s believed that the possibility of being delisted from the NYSE is the reason why the penny stock is being dumped by investors. It’s interesting to note that despite the sliding stock price, the company’s bonds have been able to generate a higher yield. This is in light of the bonds being firmly placed within the distressed class of bonds.
Dean Foods’ stock has slumped over 90% from its 52-week high of $11.14.