5 Top Reasons Why The KHC Dividend Is Safe

About The KHC Stock & Dividend

Kraft Heinz ($KHC) is an American publicly-traded food company that was created in 2015 via the merger of

• Kraft Foods, founded in 1903, and,
• H.J. Heinz, was founded in 1869.

As part of the merger of the two companies, the snack and biscuit division gut spun off into Mondelez, another good dividend stock I hold in my All-Weather Portfolio.

Kraft Heinz now has dual offices in Chicago and Pittsburgh. It is the 5th largest food producer in the world. This global powerhouse has revenues of 26 Bio USD (2021) and sits at a market cap of also 44 Bio USD. It owns an unparalleled portfolio of iconic (and new) brands in retail and various foodservice channels. Its products are sold in basically every country.

Its original Heinz Ketchup is ‘essentially the Highlander of Condiments: there can be only one according to Thrillist.com, which gathered fantastic facts about this iconic brand. Every year, more than 11 Bio packets of Heinz Ketchup are sold, that’s two packs per person.

My Family Loves KHC Products 

Same as with the products of PepsiCo, Anheuser Busch, or Mondelez, I (literally) put my money where my mouth is. We as a family always have and most likely always will love the products of Kraft Heinz. When my kids were young, they were basically brought up with Heinz baby food (their all-time favorite flavor is, weirdly, fruity custard). Personally, I love all of their BBQ sauces, my wife loves the curry mango flavor, and my kids are I guess addicted at this point to the original Heinz Ketchup.

When you open the door to our fridge, this is what you see. The curry mango sauce is awesome with chicken wings.

Kraft Heinz Compared To Its Peers

When comparing the KHC stock to its many peers, many interesting things stand out.

• Mondelez has twice the market cap of Kraft Heinz
• Kraft Heinz is 2x the market cap of Kellogg
• Kraft Heinz has the lowest forward PE Ratio
• the KHC dividend yields the most (4,5%)
• my own KHC dividend YOC is 4,92%
• the KHC dividend grows, but very slowly

5 Reasons Why The KHC Dividend Is Safe

#1 Fantastic Brand Portfolio

Kraft Heinz has an unparallel brand portfolio. For me personally, the following products have been a part of my entire life, and remain so till today:

• Heinz baby food (fed to 1-3 years old)
• Capri Sun fruit juices (loved by 4-18 years old)
• Macaroni & Cheese (ate a ridiculous amount of it when I was a student)
• Bullseye Hickory Smoke BBQ Sauce – the best sauce in the world!!!)
• Philadelphia creme cheese (loved by my entire family)

#2 Highly Predictable Business

The main reason why I love the KHC stock and believe the KHC dividend is safe is that I literally pay them to not change its products. The taste of their original ketchup, or BBQ sauce, is perfect. Changing its original recipes would be a recipe for disaster! On a yearly basis, Heinz sells 11 Bio packs of ketchup.

#3 Excellent industry fundamentals

Think how different that is to let’s say an automotive or tech company. They need to prove themselves with every new product lifecycle. If they are not ahead of their time and create products the demanding consumers want, they could be done! Remember Polaroid, Kodak, or Sony-Erickson? All those companies are now in the Graveyard of failed tech companies.

My thesis is the KHC stock and also the KHC dividend are safe because the industry they operate in functions with completely different fundamentals! In other words: I pay Kraft Heinz not to change its products

#4 Stable Dividend

The KHC dividend is not growing quickly in the past few years, but it did what I expect it to do. It was stable and was paid without any interruption, even during the biggest pandemic of the past one hundred years. The table below gives you an overview of what the KHC dividend payments look like:

The most recent KHC dividend was paid in March, here’s what my dividend statement looked like:

I feel great getting paid 84 USD net at the end of each quarter by a company I buy from and love its products! I know it’s not, but it sort of feels a bit like a flywheel. The more I buy, the higher the reward!

#5 Recent Good Stock Performance

Kraft and Heinz merged in 2015. Since then, the stock performance is pretty shitty (S&P500 in orange).

However, in the more recent two years, 2020/06 till today, 2022/06, the KHC stock has outperformed SPY, see below.

I made the following KHC stock purchases so far:

1.  June 2020  135 shares at 31 USD
2.  January 2021  100 shares at 32.50 USD
3.  July 2021  65 shares at 35.50 USD

Total shares:  300 shares with an avg. price 32.46 USD

Total KHC dividends received since then: 519 USD

Conclusion

Overall I am happy with the KHC stock performance since I bought it, and the dividends I received. I plan to buy and hold the KHC stock forever, expecting the KHC dividend to be stable and to slowly grow.

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