Assessing the Sustainability of KHC's Upcoming Dividend
The Kraft Heinz Co (KHC, Financial) recently announced a dividend of $0.40 per share, payable on 2023-12-29, with the ex-dividend date set for 2023-11-30. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into The Kraft Heinz Co's dividend performance and assess its sustainability.
What Does The Kraft Heinz Co Do?
In July 2015, Kraft merged with Heinz to create the third-largest food and beverage manufacturer in North America behind PepsiCo and Nestle and the fifth-largest player in the world. Beyond its namesake brands, the combined firm's portfolio includes Oscar Mayer, Velveeta, and Philadelphia. While the retail channel drives around 85% of its total sales, the firm operates a growing presence in the foodservice arena. Outside North America, The Kraft Heinz Co's global reach counts a distribution network in Europe and emerging markets that drives 20%-25% of its consolidated sales base, as its products are sold in more than 190 countries and territories.
A Glimpse at The Kraft Heinz Co's Dividend History
The Kraft Heinz Co has maintained a consistent dividend payment record since 2015. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down The Kraft Heinz Co's Dividend Yield and Growth
As of today, The Kraft Heinz Co currently has a 12-month trailing dividend yield of 4.53% and a 12-month forward dividend yield of 4.53%. This suggests an expectation of the same dividend payments over the next 12 months. Extended to a five-year horizon, this rate decreased to -9.40% per year. Based on The Kraft Heinz Co's dividend yield and five-year growth rate, the 5-year yield on cost of The Kraft Heinz Co stock as of today is approximately 2.77%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, The Kraft Heinz Co's dividend payout ratio is 0.66.
The Kraft Heinz Co's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks The Kraft Heinz Co's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported net profit in 9 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. The Kraft Heinz Co's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and The Kraft Heinz Co's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. The Kraft Heinz Co's revenue has increased by approximately 1.90% per year on average, a rate that underperforms approximately 67.46% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, The Kraft Heinz Co's earnings increased by approximately -0.80% per year on average, a rate that underperforms approximately 60.03% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -4.70%, which underperforms approximately 73% of global competitors.
Next Steps
Considering The Kraft Heinz Co's consistent dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors should weigh these factors in their decision-making process. While the payout ratio and profitability rank indicate a healthy financial status, the declining growth rates in dividends and earnings may raise concerns about long-term sustainability. It's essential to monitor these metrics closely, alongside industry trends and company-specific strategic initiatives, to make an informed investment decision. For those seeking income-generating investments, The Kraft Heinz Co may still hold appeal due to its current yield, but the future growth prospects should not be overlooked. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
