The Kraft Heinz Company (NASDAQ: KHC) – Not A Clear Buying Opportunity?

The Kraft Heinz Company (NASDAQ: KHC), a packaged food manufacturer, saw a boost in sales during the Coronavirus outbreak. This enabled a high dividend yield of more than 3.5 % to be maintained.

As consumers’ tastes have shifted toward healthier diets over the past many years, Kraft Heinz has had to contend with negative trends caused by these changes. The social restriction contributed to sales growth, especially for Kraft Heinz, which stockpiled finished products. As a result, the company was able to maintain dividend payments. One of Kraft Heinz’s major disadvantages is its high dividend payout ratio: in 2019 and 2020, it paid out more than 100 percent of its GAAP profits. This ratio is slightly below 100% on a non-GAAP basis.

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Meanwhile, The Kraft Heinz Company (NASDAQ: KHC) maintains an acceptable payout ratio to free cash flow. With organic sales up 6.5% during the crisis, Kraft Heinz increased its free cash flow 56% to $4.33 billion in fiscal 2020. In the first quarter of 2021, free cash flow increased by 619% year over year to $583 million. In the past 12 months, Kraft Heinz spent only about 41% of its free cash flow on dividend payments. This low dividend payout ratio indicates the company’s dividends are still sustainable.

Investing more actively in new products will be the key to Kraft Heinz’s growth. While the company may have sold well during the pandemic, resuming normal operations may reduce interest in its packaged products. It does not have a lot of products suitable for health-conscious consumers compared to some of its competitors.

Kraft Heinz Company (KHC) shares were down 0.00% to finish the last trading session at $44.09. Kraft Heinz Company shares fell -0.14% over the last five days, but they gained 5.0% over the last month. Over the last three months, the stock has gained 16.89 percent, and it has gained 27.21 percent so far this year. Additionally, the stock is currently trading at a price-to-earnings ratio of 123.85. The company’s price to cash flow is 18.68, and its price to sales ratio is 2.03.


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