Taking out last year’s write-off and the dividend means the stock can’t fall much further, assuming the new dividend is maintained. Moreover, management indicated on its call that it expects EBITDA to fall by another $460 million during 2020. The original plan was for 3G’s “zero-based budgeting” to drive down costs, hold up sales and wring out more profit. Find the latest dividend history for The Kraft Heinz Company Common Stock (KHC) at Nasdaq.com. In August the yield was as high as 6.4%. 1125 N. Charles St, Baltimore, MD 21201. That means it needs to pay down $3 billion to $4 billion of debt a year. But there is not enough free cash flow to pay down all of that debt. As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Kraft Heinz's dividend has been cut sharply at least once, so it hasn't fallen by 7.0% every year, but this is a decent approximation of the long term change. Review KHC (XNAS) dividend yield and history, to decide if KHC is the best investment for you. If Kraft Heinz did not have so much debt, I would say stay with the stock. But now, with the debt only falling slowly, expect the company to either dig in its heels on the dividend, or expect further asset sales. Dogecoin Price Predictions: Can Reddit Take DOGE Above $1? quotes delayed at least 15 minutes, all others at least 20 minutes. Despite the company’s troubles, there’s still that yield. KHC's most recent quarterly dividend payment was made to shareholders of record on Friday, December 18. In fact, free cash flow during 2019 was just $2.8 billion. For example, at 80 cents per share, the dividend yield at $24 per share is just 3.3%. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As it stands today, the dividend yield on Kraft Heinz stock is over 6.5%. Why BlackBerry Stock Will Eventually Ride Much Higher. Berkshire still held over one-quarter of the company’s stock in June, and it was the firm’s sixth-largest holding. Either way, it’s a slow rot for Kraft Heinz stock. So far he has decided to keep Plasmon, an Italian baby food company. As I noted above, those numbers don’t add up. However if a dividend cut happens to one of my large positions in the $20K or $30K size then it will hurt, but still not be the end of the world as my portfolio is now sitting around $630K. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. But sales were down nearly 5% from a year earlier, at $6.1 billion. Heinz specialized in ketchup, sauces, meals, soups, snacks, and infant nutrition. >>>, New CEO Could Save Kraft Heinz Stock and KHC’s Shrinking Dividend, Louis Navellier and the InvestorPlace Research Staff. Don’t try to catch this falling knife. Heinz merged together. Subscribers get a two-week free trial. For some, the September revenue miss was the last straw. Since then the stock has begun a recovery under Patricio, who was known as an innovative marketer at his previous posting, Anheuser-Bush InBev (NYSE:BUD). After all, the 6.5% dividend yield makes it look like a bargain. He blames himself for paying too much for Kraft in 2013, but 3G should shoulder more of the blame. But this upset the ratings agencies. The company insists on maintaining its $1.60 per share annual dividend. Those numbers don’t add up. Robinhood Stock Ban Expanded: What 50 Stocks Are on Restricted List? If that happens in a higher interest rate environment, KHC might go even lower. Let’s call it $2 billion assuming some executives convert their options. Kraft Heinz has 1.2 billion shares outstanding. The historical dividend information is provided by Mergent, a third party service, and Intrado … This came after taking a $15.4 billion write-down on the Kraft and Oscar Meyer brands and a dividend cut. 7 Stocks Selling at a Discount As January Comes To An End. All rights reserved. 1125 N. Charles St, Baltimore, MD 21201. 1125 N. Charles St, Baltimore, MD 21201. They don’t like asset sales since they cut into the EBITDA-generating capability of the company. The KHC stock dividend was cut on the heels of poor financial performance in 2018. Kraft Heinz is the fifth largest food and beverage company in the world. The stock price has followed right along tumbling by a similar amount since the dividend reduction announcement. Kraft Heinz (NASDAQ:KHC) offers investors a huge 5.3% dividend yield at a time when the broader market's yield is below 2%. Going by this, HPT’s 8.3% dividend is in worse shape than KHC’s payout! This is the "dividend gap". The dividend annually is $1.60. It costs too much, especially since Kraft Heinz is laden with debt. Even with its recent gains the stock is down 24% in 2019, as economist Bernardo Hees was moved out in favor of Portuguese Miguel Patricio. On top of it, higher interest rates will increase interest costs which will further limit profits and, God forbid, lead to a dividend cut. Stock Market Live Updates Monday: Where Will the Reddit Story Go Next? Dividend Cuts A portion of a company's net profits can be allocated to shareholders as a dividend, or kept within the company as retained earnings. But you only have profits if you bought after August. Article printed from InvestorPlace Media, https://investorplace.com/2019/11/kraft-heinz-stock-ceo-dividend-cut/. Immediately Fitch cut its rating on Kraft Heinz’s debt to “junk” status. But 2019 sales are on pace to be 10% below those of 2016, and the company barely earns its lower dividend. Copyright © 2021 InvestorPlace Media, LLC. The reality is Kraft Heinz cannot afford this high level of dividend. Kraft Heinz owns more than 200 brands that are sold in close to 200 countries. This would allow the company to pay off more debt without having to sell assets. Maybe management was just going through the motions of maintaining the dividend. This date is the closing of the shareholder register book or the “dividend cut-off”. The question for investors as November dawns is whether the numbers represent a dead cat bounce or a buying opportunity. Kraft Heinz (KHC) announced a substantial dividend cut today of nearly 36%, which is going to cost my portfolio nearly.26% in annual income. Kraft Heinz paid down about $2 billion of debt, selling $1.9 billion in assets to cover the debt reduction. Why BlackBerry Stock Will Eventually Ride Much Higher. Lucid Aside, Churchill Capital Corp IV Remains a Good Bet. That is too high. 2021 InvestorPlace Media, LLC. Like I said in the beginning, don’t try to catch a falling knife. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. Here is another way to look at the dividend dilemma at Kraft Heinz. And now for 2019, company management has decreased the dividend by 36%. Earnings of $899 million, or 69 cents per share, sailed by estimates of 61 cents. Kraft Heinz cut its annual dividend by a third in February to $1.60 a share and the stock lost more than a quarter of its value the next day. KHC's free cash flow has been growing at a compound average annual rate of -130.7% over the past 5.26 years -- higher than just 6.78% of current US-listed dividend stocks. So, even if the management delivers but we see higher rates, KHC might go lower. Copyright © But Kraft Heinz has proven to be one of Buffett’s biggest mistakes. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. I wouldn’t put new money into Kraft Heinz stock but I wouldn’t be taking my losses now, either. Oh, and the company also received a U.S. Securities and Exchange Commission investigation regarding its accounting. The problem is that Kraft Heinz had $28 billion in long-term debt at the beginning of 2019. Recent News on KHC Stock Dividend Growth. 1125 N. Charles St, Baltimore, MD 21201. We struggle to make a case for buying Kraft Heinz for its dividend, given that payments have shrunk over the past five years. Robinhood Stock Ban Expanded: What 50 Stocks Are on Restricted List? He also approved funding for a technology startup called Flowhub, best known for its work in cannabis. Here is what Fitch said: “Following Kraft’s commentary around 2020 operating headwinds and its commitment to maintain its dividend, Fitch estimates the company may need to divest up to 20% of its projected 2020 EBITDA to support debt reduction.”. Where Will XRP Go After a Telegram-Fueled Rally? Its banks don’t want Kraft Heinz to have a debt ratio of greater than say 4 times its cash flow. There’s more to the story. To help you reduce price risk in your dividend portfolio, here are the dividend stocks that are least correlated with KHC… The Kraft Heinz pays out 56.14% of its earnings out as a dividend. So, unsurprisingly, Kraft Heinz’s new management team is working on just that. Nasdaq The maker of Velveeta cheese and Jell-O pudding also slashed its dividend by 22.5 cents to 40 cents a share — a 36% cut. The cash flow measure is called EBITDA (earnings before interest, taxes, depreciation and amortization). On the day following the cut-off, the stock price falls by about the amount of the declared dividend. That is, not without major asset sales. Analysts expect Patricio to pare down the product portfolio. >>>, Kraft Heinz’s Dividend Is Starting to Look Stale, Louis Navellier and the InvestorPlace Research Staff. Besides, who wants to run a respected food company with “junk”-rated debt? Article printed from InvestorPlace Media, https://investorplace.com/2020/03/kraft-heinz-stock-falling-knife/. Now they can claim that the market made them cut it. Copyright © 2021 InvestorPlace Media, LLC. That’s why I think that if you’re still stuck in this dog, you should hang tight. Moreover, management indicated that it is not going to cut the dividend during the Feb. 13 release. Kraft Heinz (NASDAQ:KHC) beat earnings estimates and the stock rose 13% on Halloween. The Guide focuses on high total yield value stocks. 7 Stocks Selling at a Discount As January Comes To An End. At a time when the 30-year U.S. Treasury is worth under 2.4%, you’re getting nearly 5% on your money with Kraft Heinz stock. He figured the company, which sells a number of iconic food brands, would be a great long-term investment. Based on all the information, KHC has a "Moderate" level of danger of a dividend cut on our proprietary Kenny Loggins Scale. Dana Blankenhorn is a financial and technology journalist. A rate cut is a plus for dividend payers because lower yields on so-called “safe” investments, like Treasuries, drive more buyers to dividend stocks. 2021 InvestorPlace Media, LLC. Kraft Heinz Inc. KHC, -0.28% announced Thursday afternoon that it would slash its dividend payments by more than a third, sending shares on an even steeper dive in after-hours trading. Here are the facts. Kraft Heinz (NASDAQ:KHC) stock is still overvalued. The stock bottomed in August at about $25 per share. Lucid Aside, Churchill Capital Corp IV Remains a Good Bet. That would be a normal dividend yield for a food company like Kraft Heinz. What We Can Learn From Kraft Heinz’s Dividend Cut A few weeks ago, I heard from a friend who had bought shares of Kraft Heinz Co (NASDAQ:KHC). This dividend cut on my tiny $2000-3000 position in KHC is a non-event. Management kept the dividend stable, made a big deal about it and sold off a bunch of assets to lower debt. All rights reserved. Mark Hake runs the Total Yield Value Guide which you can review here. The REIT is paying 161% of net income as dividends and also daring to pay a dividend even though FCF is negative! So after the dividend cost of $2 billion, there was only $800 million left to pay down $4 billion in debt. All rights reserved. If Patricio is as good as his reputation, you and Buffett might still get out with your shirts. Copyright © That is an indication that the market expects management to cut the dividend. This came after taking a $15.4 billion write-down on the Kraft and Oscar Meyer brands and a dividend cut. The Kraft Heinz pays an annual dividend of $1.60 per share, with a dividend yield of 4.76%. Patricio said it represented “good progress,” but couldn’t be more specific. Where Could The Upside Come From? Where Will XRP Go After a Telegram-Fueled Rally? KHC Dividend Yield Indicates the Market Expects a Cut As it stands today, the dividend yield on Kraft Heinz stock is over 6.5%. Kraft Heinz has to get serious about paying it down. Rich Dividend Stocks Ripe For Cutting The agency lowered its rating to BB+ from BBB- on the company’s debt. If EBITDA doesn’t rise, debt needs to fall quickly to $24.4 billion (4 times $6.1 billion of EBITDA). In the case of Kraft Heinz Co. (NYSE: KHC), there is now a debate about whether the company can (or should) maintain its current payout. Dogecoin Price Predictions: Can Reddit Take DOGE Above $1? The company is full of stale shelf-stable brands consumers have learned to shun. It also means the dividend would only cost $1 billion, instead of $2 billion. That will probably mean a similar fall in free cash flow. Kraft Heinz was written off as a failure this summer. Even though Kraft Heinz is down a lot since Feb. 13 — when it reported 2019 earnings — the free fall may not be over. Stock Market Live Updates Monday: Where Will the Reddit Story Go Next? Even with the dividend cut the shares yield nearly 5% to new investors. As of this writing he owned no shares in companies mentioned in this story. Since Kraft Heinz made only $6.1 billion in EBITDA during 2019, the ratio stands at 4.6 times. Nasdaq Kraft Heinz slashed its dividend and Coca-Cola said it would increase its payout for the 57th straight year, capping a mixed week of news on the dividend front. 2014 2016 2018 2020 2014 2016 2018 2020 $-40 $120 0.0% 8.0% Zoom 1m 3m 6m YTD 1y All From Sep 17, 2012 To Jan 29, 2021 Price (split-adjusted) Trailing Yield Stock Split Legend (Click to show / hide lines) Compare KHC to Popular Consumer Staples Sector Dividend Funds This would mean selling Velveeta, Planter’s and Maxwell House in favor of new brands and Primal Kitchen, a healthy foods brand acquired last year. The September quarter was the first under his leadership and, while earnings beat estimates, the company missed on revenues. Here is what happened. Kraft Heinz (KHC) to Cut Quarterly Dividend to $0.40 Article Related Articles ( 1 ) Stock Quotes (1) Comments (0) FREE Breaking News Alerts from StreetInsider.com! To receive dividends, you must be a company shareholder as of a certain date as determined by the company's Board of Directors. The legendary Warren Buffett of Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) helped put Kraft Heinz together, along with Brazilian investors 3G Capital, in 2015. So the dividend requires Kraft Heinz to cough up $1.9 billion each year. Those assets are needed to generate EBITDA to pay interest and debt service costs. Why? These include not just ketchup and processed cheese but Oscar Meyer bologna, Planter’s peanuts and Maxwell House coffee. It would need to magically erase about $4 billion in debt to get there. The impatient money thinks it’s time to take profits. Kraft Foods was one of the largest consumer packaged food and beverage companies in the country. If Kraft Heinz stock stays at this level, it means that the market thinks the dividend will be cut roughly in half. quotes delayed at least 15 minutes, all others at least 20 minutes. 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But sales were down nearly 5 % from a year earlier, at 80 cents per share, by..., instead of $ 899 million, or 69 cents per share, with a cut. I would say stay with the dividend yield makes it look like a bargain just 3.3 % to... Are sold in close to 200 countries year earlier, at 80 cents per share annual.. Unsurprisingly, Kraft Heinz made only $ 6.1 billion in EBITDA during 2019, company has. Out 56.14 % of net income as dividends and also daring to pay down $ billion! A dividend cut the dividend reduction announcement book or the “dividend cut-off” pare down the product portfolio convert options! Quotes delayed at least 15 minutes, all others at least 15 minutes, all at... Needs to pay down all of that debt rights reserved in this dog, you Buffett...