Shares of frozen-food company Pinnacle Foods Inc. had a hot start in their public-trading debut, revealing investors' healthy appetite for a stable company poised to pay a hefty dividend.
Shares opened at $22.26 Thursday on the New York Stock Exchange, up 11% from their initial-public-offering price of $20.
The company and stockholders sold 29 million shares, which priced Wednesday night at $20, at the high end of an expected $18-to-$20 range, valuing the offering at $580 million.
The Parsippany, N.J.-based maker of Vlasic pickles and Celeste pizza was seen as a test of how much investors would be willing to pay for a company that offers a hefty dividend but also comes saddled with debt and limited prospects for growth.
Pinnacle said in its prospectus that it is targeting an 18-cent quarterly dividend, which would imply a 3.6% annual yield based on the offer price. That compares with a 2.2% dividend yield on stocks in the Standard & Poor's 500-stock index.
The company's sales, meanwhile, have been mostly flat. At the end of last year, its total debt stood at $2.1 billion, or about five times 2012's adjusted earnings before interest, taxes, depreciation and amortization.
With the Federal Reserve keeping interest rates extremely low, high-dividend-paying stocks have been commanding a premium from investors seeking to boost income generated by their portfolios.
Pinnacle, which is backed by Blackstone Group LP, is the latest in a string of deals brought to market this year by private-equity firms. Blackstone bought Pinnacle for $2.16 billion in 2007. It added Birds Eye Foods Inc. in 2009 with a $1.3 billion deal.
Barclays PLC and Bank of America Corp. served as the deal's primary underwriters.
Write to Matt Jarzemsky at firstname.lastname@example.org