While the stock market has closed up in four of the last five years and the S&P 500 Index ($SPX) has recouped its 2025 losses to turn green for the year, Kraft-Heinz (KHC) is trading at levels last seen during the 2020 market crash when stocks plunged amid the COVID-19 pandemic.
Thanks to the slide in KHC stock, its dividend yield has soared to a juicy 6%. The consumer staples giant counts Warren Buffett-led Berkshire Hathaway (BRK.B) as its biggest shareholder, even though the legendary value investor hasn’t made money in the stock and admitted to overpaying for the company.
If you are a growth investor, then a name like Kraft-Heinz won’t fit your portfolio by a mile. However, the stock attracts value investors, particularly those seeking inexpensive stocks with high dividend yields. In this article, we’ll explore whether KHC is a buy for its 6% dividend yield or if investors would be better off finding opportunities elsewhere.
Kraft-Heinz Has Reiterated Its Commitment to Dividends
Dividends are not contractual payments, and companies can change or suspend them based on the business outlook. KHC also slashed its quarterly payout by 36% in 2019, which was a particularly troublesome year for the multinational food giant, and it had to write down its brands by $15 billion.
That said, on more than one occasion, Kraft-Heinz management has reiterated its commitments to dividends. Most recently, during Deutsche Bank’s dbAccess Global Consumer Conference earlier this month, CFO Andre Maciel emphasized that “preserving” the dividend and investment grade credit rating were a priority for Kraft-Heinz even as it considers strategic actions to enhance shareholder value. Here, it is worth noting that Kraft-Heinz has maintained its quarterly dividend at $0.40 after slashing it in 2019. While the company hasn’t raised the dividend, it hasn’t axed it either since.
KHC Stock Forecast
Wall Street analysts haven’t been too bullish on Kraft-Heinz and have turned incrementally bearish on the company. None of the 20 analysts actively covering the stock currently rates KHC as a “Buy” or equivalent. Sixteen analysts rate Kraft-Heinz as a “Hold,” while the remaining four rate it as a “Sell” or lower.
Kraft-Heinz’s mean target price is $28.85, which is 8.2% higher than the current price. The stock trades slightly above its Street-low target price of $25, while the Street-high target price of $31 represents potential upside of around 16.3% from current prices.
Analysts’ pessimism toward KHC is not hard to comprehend. While no one really expects Kraft-Heinz to grow rapidly, the company’s sales growth has been falling, and its revenues fell 3% last year. While pricing has been a bit of a savior, its volumes have fallen for the last three consecutive years.
During the Q1 2025 earnings call, management lowered its 2025 guidance and now expects organic sales to fall between 1.5%-3.5% this year. Analysts are modelling a 3.2% year-over-year revenue decline this year, post which its revenues are expected to rise in the ballpark of 1% for the next two years.
The company is expected to post earnings per share of $2.57 this year, which is 16% lower than last year. KHC trades at a forward price-earnings (P/E) multiple of 10.35x. The company even trades below its book value, and its valuation multiples are a discount to most of its U.S.-based peers.
Kraft-Heinz Is Looking at Strategic Alternatives
Kraft-Heinz is weighing its strategic alternatives and, in an update last month, the company said that for the last few months it has been “evaluating potential strategic transactions to unlock shareholder value.” The company did not provide more color on the possible transactions, but in the same release, it announced that two board members related to Berkshire have stepped down. Some see Berkshire’s representatives leaving the board as a sign that the conglomerate is considering selling its stake.
Should You Buy Kraft-Heinz Stock?
Kraft-Heinz faces several headwinds, many of which other consumer packaged goods companies are also facing. The competition from private labels continues to intensify, especially as consumers are still trading down amid constraints on monthly budgets. Moreover, brands launched by celebrities are gaining traction among their followers. Thanks to these headwinds, legacy brands like Kraft-Heinz no longer enjoy the kind of moat and pricing power that they once did. There is no easy fix for Kraft-Heinz, but the company has been working on cost cuts and efficiencies, which have helped somewhat protect its operating margins. Last month, it announced a $3 billion investment to upgrade its U.S. manufacturing plants, which will help it increase its efficiencies.
All said, while I don’t find KHC to be a screaming buy, the company’s strategic actions can help support the stock. The current valuations are not unreasonable and should help put a floor under KHC stock. For someone looking for a relatively safe high-dividend stock, Kraft-Heinz might fit the bill.
