Our first idea is a food company that is undervalued and is paying a hefty annual dividend yield of 5.22%, paid quarterly. Our second recommendation is a sale of a previous pick that has been stopped out.
Buy: The Kraft Heinz Company (KHC)
From Forbes Dividend Investor
Pittsburgh, Pennsylvania-based Kraft Heinz makes and markets food and beverage products that include condiments and sauces, cheese and dairy, and complete meals.
In its last earnings report on July 30, the company reported second-quarter earnings that topped analysts’ forecasts, as pandemic-fueled buying buoyed profits. Earlier this month, it announced plans to cut $2 billion of costs and to focus on its premier brands. Warren Buffett’s Berkshire Hathaway is a big shareholder. Revenue this year is expected to grow 3% to $25.74 billion, with earnings down 6.6% to $2.66 per share, giving the stock a price-earnings ratio of 10.9. The average P/E over the past five years has been 17.8. The stock also trades 50% below both its five-year average price-sales and price-to-book value multiples.
With a debt-to-equity ratio of 0.58, Kraft Heinz is much less leveraged than many of its food peers like Campbell Soup, which sports a debt-to-equity ratio of 2.4. Kraft Heinz pays a quarterly dividend of $0.40 per share. Free cash flow per share of $3.15 is nearly double the $1.60 in annual dividends. Technically, the stock is oversold and the MACD is turning positive.
John Dobosz, Forbes Dividend Investor, newsletters.forbes.com, 212-367-3388, September 25, 2020