The Bega Cheese Ltd (ASX: BGA) share price slumped 1.7% lower yesterday to close at $5.36 per share.
That’s just shy of the 52-week high of $5.63 that the Aussie dairy group’s shares hit earlier this week. So, amongst the noise of the markets right now, are Bega Cheese shares a buy?
Why the Bega Cheese share price has surged
It’s been a funny old year for many ASX shares. Consumer staples shares like Bega Cheese have generally done well amid the coronavirus pandemic.
The ASX supermarkets like Coles Group Ltd (ASX: COL) have done well as restrictions have meant more people purchasing food from supermarkets. We’ve also seen waves of panic buying across the country throughout the year.
That has seen downstream suppliers like Bega Cheese perform strongly. In its full-year earnings result, the Aussie dairy group announced a 5% increase in revenue to $1.5 billion.
Operating cash flow jumped from $100.3 million to $137.7 million as sales surged across its product lines. That included a 9.8% surge in its spreads sales with Vegemite and peanut butter growing 4.8% and 14.3% higher.
Those strong sales figures have underpinned strong capital gains for Bega Cheese shares in 2020.
Is Bega Cheese a tasty buy?
I think some investors would hesitate to buy an ASX share at a 52-week high. However, there is still a lot to like about Bega Cheese shares right now.
For one thing, the broad market sell-off across the S&P/ASX 200 Index (ASX: XJO) has shown that volatility is still present.
I like the Consumer Staples sector given its non-cyclical earnings. That was reflected in Bega’s full-year result and I think it can repeat that strong sales growth next year.
ASX dividend shares are also good when times are tough. Bega Cheese shares are currently yielding 1.9%, which is quite handy in the current environment.
All in all, I don’t think we’ll see a surge in the Bega Cheese share price in the next 12 months. However, it does appear to be a solid ASX dividend share with strong cash flow generation.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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