Kraft Heinz Stock Delivers Strong Cash Yield – Upside Ahead

Kraft Heinz Stock Delivers Strong Cash Yield - Upside Ahead?

Kraft Heinz (KHC) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

KHC Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 14.2%, but Kraft Heinz stock does
• Strong Margin: Last 12 month operating margin of 18.6%
• Growth: Last 12 revenue growth of -3.5% - revenue decline, but this selection is all about high yield and margin
• Valuation: KHC stock currently trading at 37% below 2Y high, 11% below 1M high, and at a PS lower than 3Y average.

Below is a quick comparison of KHC fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While KHC stock may be a compelling investment opportunity, it's always helpful to be aware of a stock's history of drawdown. KHC took a hit of about 71% in the 2018 correction, nearly 36% during the Covid pandemic, and around 26% in the inflation shock. These aren't small dips. Even with solid fundamentals, the stock hasn't been immune to heavy sell-offs when the market turns sour. It's a reminder that risk stays real, regardless of the positives. But the risk is not limited to major market crashes. Stocks fall even when markets are good - think events like earnings, business updates, outlook changes. Read KHC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell KHC Stock.

Stocks Like KHC

Not ready to act on KHC? Consider these alternatives:

1. Capital One Financial (COF)
2. Kimberly-Clark (KMB)
3. Equifax (EFX)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

Portfolios Beat Stock Picking

Individual stocks can soar or tank but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside and mitigate the downside associated with any individual stock.

Beating the market consistently is hard, but the Trefis High Quality (HQ) Portfolio makes it look achievable. By selecting 30 high-conviction stocks, the HQ strategy has historically outpaced the S&P 500, S&P Mid-cap, and Russell 2000. See how this curated selection delivers superior risk-adjusted returns in our detailed performance factsheet.