Summary
Kraft Heinz Company has a dividend yield of ~5% due to a declining stock price but the dividend is not growing much.
The company has successfully increased operating margins to the mid-20s since the merger.
The company has not had much success generating organic sales growth and only recently focused on brand investment.
Kraft Heinz has a High Yield but Little Dividend Growth
The Kraft Heinz Company (KHC) has a dividend yield of nearly 5% but I’m not a buyer until the dividend’s growth rate increases. The company has one of the highest dividend yields of any consumer staples company, which is a defensive sector and thus many small investors seeking income and dividend growth may consider buying this stock. But from my perspective as a small investor the dividend has only been growing at a low single-digit rate and the payout ratio is near 70% based on adjusted earnings and even higher based on diluted earnings. Despite the high yield this is not an attractive combination for a dividend growth investor. Furthermore, the company is struggling to deliver organic revenue and EPS growth, which is not something one likes to see as a dividend growth investor. In addition, the company may attempt another acquisition, which could possibly increase debt or dilute existing shareholders further limiting my interest.
