5 Top Reasons Why The KHC Dividend Is Safe

My family loves Kraft Heinz products and we hope the company will never change the taste of its iconic brands. That's just one of the reasons why I'll reinvest the KHC dividend in the decades to come.
Why The KHC Dividend And KHC Stock Are Safe

About The KHC Stock & Dividend

KHC stock at one glance

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.

KHC stock at one glance

 

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

KHC dividend compared to other Staples

 

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)

KHC Dividend is save due to its brand portfolio

 

#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:

KHC Dividend 2022

 

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

KHC Dividend payout 2022 03

 

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).

KHC Stock Price Compared to SPY 2016

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

KHC Stock Price Compared to SPY 2020

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.

 

📘 Read Also

FAQ

 

  • Does Kraft Heinz still own Mondelez?

    No, Kraft spun off its biscuit business in 2012 into an entirely separate entire, now called Mondelez.


  • Is the KHC stock a buy?

    From my point of view, yes, if you are looking for a stable solid business. It won’t make you rich overnight, but the KHC dividend has been stable and reliable, and the stock performance of $KHC in the past years has been outperforming the S&P500.

     

  • Who Owns Kraft Heinz?

    Warren Buffet’s Berkshire Hathaway owns 26% of Kraft Heinz. Always feels good owning a stock that also one of the best value investors of our time owns!

     

  • What is the KHC dividend yield?

    As of 2022/06, the KHC dividend yield sits at 4,5%, one of the highest in the consumer staples.


  • How Many Heinz Ketchup Packs Are Sold Per Year?

    Every year, 11 Bio packs of Heinz ketchup are sold. That’s 1,27 Mio per hour, and 353 packs per second, and two servings per person!
     


  • How Old Is The Kraft Heinz Company?

    Kraft Heinz (KHC) was created in 2015 via the merger of two companies, namely Kraft Foods, founded in 1903, and, H.J. Heinz, which was founded in 1869. In 2012, Kraft Heinz spun off its snack business into the company Mondelez.

     

  • Why Did McDonald’s Stop Serving Heinz Ketchup?

    Because Kraft Heinz hired a former chief executive of Burger King, causing McDonald’s to end the relationship. From my research, McDonald’s was never a large revenue driver for Kraft Heinz.

     

WiseStacker's Take

4.1 Score

My family loves Kraft Heinz products and hope the company will never change the taste of its iconic brands. That's why reinvest the KHC dividend in the decades to come.

PROS

  • Fantastic brand portfolio
  • Highly predictable business
  • Excellent industry fundamentals

CONS

  • Lack of dividend growth
  • Trends to healthy diet needs to be addressed
  • Not good stock performance 2015-2020

Review Breakdown

  • Financial Strength
  • Predictability
  • Growth Rank
  • Dividend
  • Overall Rating

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