Known worldwide for its successful brands, The Kraft Heinz Company can offer investors a great dividend option.
The Kraft Heinz Company was formed in 2015 through a merger between Kraft Foods and Heinz, and Warren Buffett became involved in the merger in 2013, holding a 26.65% stake and over 325 million shares in the company. Minority shareholders are Vanguard (4.49%), SSgA Funds Management (2.5%) and BlackRock Fund Advisors (2.22%).
The company has had some bumps in the road, but with its strong brands, is it worth the investment for its dividend potential? Let’s dig.
About the Kraft Heinz Company
The Kraft Heinz Company, headquartered in Pittsburgh, Pennsylvania, manufactures and markets food and beverage products in the US and around the world. It produces a wide range of products, including:
- Cheese and dairy products
- Spices and seasonings
The brands include Oscar Mayer, Kraft, Heinz, Ore-Ida, Classico, Velveeta, Smart Ones, Capri Sun, Kool-Aid, Jell-O, Philadelphia, Lunchables, Maxwell House, Gray Poupon and others.
The company’s storied legacy began when londonbusinessblog.com Henry John Heinz founded a small food company in 1876. Heinz Tomato Ketchup was one of the very first products the company developed and remains Heinz’s most iconic brand, dominating the most market share for ketchup in the US. was founded in 1905 and Heinz built 20 processing plants across the country.
On the other hand, Kraft started when James L. Kraft started a door-to-door cheese wholesale business in Chicago, which was founded in 1909. Five years later, the JL sold Kraft and Bros. Company 31 kinds of cheeses. Later, the company created a pasteurized processed cheese so that consumers can ‘store’ cheese in the kitchen for a longer period of time.
The company distributes products through its own channels, as well as through independent brokers, agents and chains, wholesalers, cooperative and independent supermarket chains, as well as through a variety of other distributors. It also sells its products online through various ecommerce platforms and retailers.
The Kraft Heinz Company expects continued strong performance in 2022, with adjusted EBITDA between $5.8 billion and $6 billion. The company’s net sales decreased 0.9% compared to a year ago. Organic net sales also increased by 10.1% compared to a year ago.
Net profit/(loss) increased by more than 1,000% year-on-year due to debt service costs. Adjusted EBITDA declined 10.9% to $1.5 billion year-on-year. Diluted earnings per share were $0.21, up 1,150%. Adjusted EPS was $0.70, down 10.3%.
Year-to-date, net cash from operating activities was $788 million, down 61.2%. Year-to-date free cash flow was $353 million, down 78% from the prior period.
Advantages and disadvantages of investing in Kraft Heinz
Before investing, it is worth taking a look at the pros and cons of investing in Kraft Heinz.
The benefits of investing in Kraft Heinz include:
- Brand loyalty: Kraft Heinz customers have significant brand loyalty, believing that they offer better service and higher quality than other companies, regardless of the price of their products. Consumers may also be more inclined to try other products that Kraft Heinz also offers.
- dividends: Anyone who invests in Kraft Heinz cannot ignore the dividend promise. The most current quarterly dividend will be paid on Friday 23 September. Investors announced on Friday, August 26, will receive a dividend of $0.40 per share, with an ex-dividend date slated for August 25. The company has an annualized $1.60 dividend and a yield of 4.13% with a payout ratio of 131.15%.
- Optimized brand portfolio: Kraft Heinz has revived its classic brands and got rid of its weaker brands, including Cheez Whiz abroad. At the same time, it has adopted growing brands for its portfolio, including Brazilian spice maker Hemmer and Germany-based Just Spices.
The disadvantages of investing in Kraft Heinz include:
- Declined sales and debts: Kraft Heinz has seen stagnant growth beyond 2020 to 2021 growth due to excessive COVID-19 consumer buyouts and price increases. In addition, after the merger, the company was carrying large debts.
- Healthier Food Trends: One of the downsides of Kraft Heinz’s products is the fact that the world as a whole has made a bigger shift towards healthier food trends. These changes are likely to continue to challenge the company to change its messaging and marketing in the near term and into the future.
- Assembly consumer prices: It’s no secret that consumer prices have continued to rise. This means that Kraft Heinz will have to continue to meet the demands of increasing the cost of its products, supply chain challenges and making consumers want to continue buying the company’s brands. As prices rise, the company can always run the risk of customers switching to cheaper brands.
Watch Kraft Heinz for all the right reasons
So, should you invest in Kraft Heinz? That depends on your goals and investment objectives. Through its focus on basic consumer goods, it shows potential in the sense that it offers items that every consumer needs. In other words, due to its inherent nature, you can consider Kraft Heinz as a worthwhile investment due to its brand awareness and successful worldwide product distribution.
Kraft Heinz has paid out 129% of profits in the past year, which could be a sign of an unsustainable dividend, although it’s important to note that it has historically paid out free cash flow within a range well within normal limits. lies – 61% – in the past year.
However, the significant indebtedness and problems selling Kraft Heinz products (which don’t account for pandemic-era increases) could drive you off the stock. The company may still stock up in the future, but in the meantime, it’s worth considering whether investing in the business in the interim makes sense for your needs, although a buy-and-hold investment pays off in the long run. can throw off.