We recently published a list of 10 Defensive Dividend Stocks To Buy During Market Sell Off. In this article, we are going to take a look at where The Kraft Heinz Company (NASDAQ:KHC) stands against other defensive dividend stocks to buy during market sell off.
The importance of defensive dividend stocks only becomes clear when the broader market is taking a hit. The S&P is down nearly 8% in a month while Nasdaq has lost over 11.41%. Investors are wondering how to protect themselves from volatility and the answer lies in defensive stocks.
Here is a key distinction investors must understand. Growth stocks rely on price appreciation to generate shareholder returns, something that is hard to achieve when the broader market is facing a severe sell-off. Dividend stocks, on the other hand, became more attractive. They not only help reduce the volatility but as their price goes down, their yield becomes more attractive.
We therefore decided to identify the best stocks for such a scenario. To come up with the list of 10 defensive dividend stocks to buy during a market sell-off, we only considered stocks belonging to the Consumer Defensive sector with a market cap of at least $2 billion and a dividend yield of at least 3%.
A closeup of an assembly line worker inspecting a newly produced jar of condiments and sauces.
The Kraft Heinz Company (NASDAQ:KHC)
The Kraft Heinz Company manufactures and sells beverages and food products globally. The company is well known for its sauces and condiments, especially the globally known ‘Heinz Ketchup’. The company’s stock has an attractive dividend yield of 5.29%.
KHC is one of those stocks that enjoys the backing of Warren Buffet’s Berkshire Hathaway. However, it has disappointed investors for years, trading sideways for about 5 years now. However, with the broader market trading at record valuations, a 5.29% yield is better than putting your money in the bank.
But that’s not why investors should buy this stock. The business is improving and here’s how. During the last 5 years, the company has continuously paid down its debt, reducing it by one-third approximately. The negative effects of the debt are further reduced by an improved operating cash flow. The cash flow to debt ratio has increased from 0.1 to 0.2 in 5 years, showcasing how the company has reduced its debt risk.
At a 16.2% cash flow to sales ratio, investing for the turnaround is worth it. Any little price appreciation will add significantly to the already strong dividend yield.
Overall, KHC ranks 1st on our list of defensive dividend stocks to buy during market sell off. While we acknowledge the potential of KHC as a leading investment, 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 as promising as 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.
