Is Kraft Heinz Company (KHC) One of the Best Dividend-Paying Beverage Stocks to Buy?

We recently published a list of 10 Best Dividend-Paying Beverage Stocks to Buy. In this article, we are going to take a look at where The Kraft Heinz Company (NASDAQ:KHC) stands against other best dividend-paying beverage stocks to buy.

The American consumer staples industry is currently dealing with an evolving landscape, with a key shift being the heightened influence of health considerations on consumer behavior. Health and wellness are now common themes of interest among the younger generation of consumers and the prevalence of weight-loss drugs has also led to a change in consumer’s eating habits, including both reducing appetite and altering the kind of foods and drinks they want.

READ ALSO: 12 Best Fortune 500 Dividend Stocks To Buy Right Now

Many industry players have realized that they’ll need to evolve and keep up with their consumers in order to achieve success. A great example is how an increasing number of beverage companies are now working to deliver more with their products, with one prominent trend being better-for-you (BFY) drinks. These are beverages that go beyond the scope of mere hydration and provide a solid benefit, such as supporting energy, gut health, cognition, immunity etc. However, in order for it to sell, a drink also needs to taste good, which presents a challenge in itself since the modern consumer is also wary of high sugar levels and artificial sweeteners. As a result, many industry players are now experimenting with natural sweeteners like allulose, stevia, and monk fruit alongside advanced sweetness modulation technologies.

Another major beverage category that is rapidly evolving with shifting consumer trends is that of alcohol. The rising importance of health and wellness has led to an increasing number of younger people drinking less alcohol, with many giving it up altogether. As a result, nearly every major alcohol company has come up with no- and low-alcohol versions of their highly acclaimed brands, making sure they don’t miss out on their share of a market that is becoming more and more established every day. The strategy seems to be paying off, as according to Nielsen, non-alcoholic beer, wine, and spirits collectively surpassed $565 million in sales in 2023, up 35% from the year before. Sales of Guinness 0.0, the zero-alcohol version of the highly beloved Irish stout, surged by nearly 50% between February 2023 and February 2024, putting it among the Best Selling Non Alcoholic Beers in the US.

A recent looming threat for the American beverage industry has emerged in the form of tariffs. President Donald Trump has announced a 25% tariff on all steel and aluminum being imported into the US, eliminating previous country exceptions and exemptions. The blanket tariffs, set to go into effect next month, will have serious consequences for the beverage industry since nearly 75% of all new beverage launches in North America now appear in aluminum cans, according to supplier Crown. An increase in input costs will inevitably lead to a rise in prices for end consumers, causing serious problems for some beverage categories that are already struggling, such as craft beer. A short-term solution could be resorting to alternative packaging materials, such as glass or plastic, but that will undoubtedly come with its ecological concerns and ramifications. Or perhaps, this packaging problem could be a blessing in disguise and lead to some much-needed creative destruction and forever change the industry, since the drinks aisle has always been a hot spot in terms of innovation.

According to data from Janus Henderson’s Global Dividend Index, the global beverage industry paid a total of $9.6 billion in dividends in Q3 2024, up 31.5% YoY and 96% more from the same period in 2019. However, the Food & Beverage index, which represents companies across various sub-industries in the sector, has delivered modest returns over the last year. The index has risen by 4.62% over the last 12 months, against gains of almost 22.9% by the broader market.

Methodology

To collect data for this article, we looked up various companies working in the beverage sector, picked out the ones that pay dividends, and ranked them by their number of hedge fund investors according to the Insider Monkey database, as of Q3 2024. Following are the Best Beverage Dividend Stocks to Buy Now.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Is Kraft Heinz Company (KHC) the Best Dividend-Paying Beverage Stock to Buy?

A closeup of an assembly line worker inspecting a newly produced jar of condiments and sauces.

The Kraft Heinz Company (NASDAQ:KHC)

Number of Hedge Fund Holders: 38

The Kraft Heinz Company (NASDAQ:KHC) is a globally trusted producer of high quality, great tasting, and nutritious food and beverages. Formed in 2015 through the merger of Kraft Foods Group and H.J. Heinz Holding Corporation, KHC is the third-largest food and beverage company in North America and the fifth-largest food and beverage company in the world.

The Kraft Heinz Company (NASDAQ:KHC) reported mixed results in Q4 2024, as its weaker sales figures were offset by profitability initiatives. The company declared adjusted EPS of $0.84, up $0.06 from market consensus, thanks largely to unexpected tax benefits and a reduced number of outstanding shares. However, the food and beverage giant’s Q4 revenue was reported at $6.58 billion, down 5% YoY and slightly below the forecasted $6.66 billion, due to declining organic sales. KHC witnessed its net sales decline by 3.9% YoY in the US, its primary revenue driver, despite a modest increase in pricing that slightly cushioned volume declines. The Chicago-based company reported a free cash flow of $3.2 billion for 2024, up 6% YoY, and returned $2.7 billion to its stockholders through share buybacks and dividends, which provide the highest yield in the food industry. KHC declared a quarterly dividend of $0.4 per share this month, in line with the previous.

Shares of The Kraft Heinz Company (NASDAQ:KHC) recently fell to a 52-week low after its management set up disappointing guidance for FY 2025. Due to unfavorable foreign currency trends, a price-sensitive consumer population, and rising ingredient costs, the company expects to generate full-year earnings of approximately $2.68 per share, down 12% YoY and short of the consensus consensus estimates of $3.04.

Mairs & Power stated the following regarding The Kraft Heinz Company (NASDAQ:KHC) in its Q3 2024 investor letter:

“We added The Kraft Heinz Company (NASDAQ:KHC) to the Fund in the quarter. Kraft Heinz is a leading global food company which possesses a portfolio of iconic brands, including its eponymous ketchup brand. The company has been undergoing an operational transformation focused on driving efficiency gains in supply chain, manufacturing and distribution. These efficiency gains have fueled increased investments in technology, automation, innovation and marketing, which should ultimately drive more consistent organic revenue growth and high single digit earnings per share growth. We expect above-average long-term returns, buoyed by consistent free cash flow generation, opportunistic share repurchases and an attractive 4-5% dividend yield. A modest current valuation affords an ample margin of safety.”

Overall, KHC ranks 5th on our list of best dividend-paying beverage stocks to buy. While we acknowledge the potential for KHC to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.