Kraft Heinz: Buy or Avoid? Long-Term Income Potential Examined

Investors are faced with a difficult choice regarding Kraft Heinz (NASDAQ: KHC). While the company's strong brand portfolio and high dividend yield attract attention, recent struggles in organic sales raise concerns. Caution is advised for short-term investments.

Date: 12-01-2025

AI Rating: 5

Investment Prospects for Kraft Heinz

Kraft Heinz is currently experiencing varied market perceptions. While the company has a captivating portfolio of renowned consumer brands, it is struggling with its turnaround efforts. This raises significant concerns for investors considering the stock for long-term investment.

One critical element to consider is Kraft Heinz's dividend yield, which stands at 5.3%, substantially higher than the average yield for consumer staples companies at just 2.8%. This high yield indicates that the stock could be attractive for income-seeking investors despite its performance challenges.

However, the report mentions that Kraft Heinz's third-quarter 2024 organic sales for the focused brands fell by 4.5%. This is a troubling sign as it indicates that the targeted brands are not performing as anticipated, especially against the backdrop of other brands that have shown growth. This failure to meet expectations is crucial since it could lead to further declines in stock prices if the situation does not improve.

Another aspect influencing investor sentiment is Kraft Heinz's financial leverage, which has shown material improvement since reaching its peak in 2020. This reduction in leverage suggests the company is becoming more financially stable and could help mitigate risks associated with its current market challenges.

Given Kraft Heinz's struggles and the challenges it faces, the stock is seen as 'dead money' until a turnaround occurs. Investors who are not willing to wait for recovery might choose to avoid it, while those with a long-term perspective could consider the stock attractive for its potential future growth and income generation.

Key Points:

High Dividend Yield: 5.3% (Rating: 7)
Falling Organic Sales: -4.5% growth for key brands (Rating: 4)
Improving Financial Leverage: More manageable debt levels (Rating: 6)

Stocks: KHC PG UL