Analyzing Kraft Heinz’s Recent Dividend and 2016 Outlook



Recent dividend declared

On May 5, one day after the 1Q16 earnings results, Kraft Heinz (KHC) announced a regular quarterly dividend of $0.58 per share of common stock. This dividend will be payable on July 8, 2016, to shareholders of record as of May 27, 2016. The company increased its quarterly dividend by 4.5% on November 5 to $0.58 from the prior dividend of $0.55 per share. The first increased dividend was paid on November 20, 2015, to shareholders of record as of November 16, 2015. Kraft Heinz has a dividend yield of 2.6% as of May 9. The company paid $1.15 per share in the dividend in fiscal 2016 to date. Kraft Heinz plans to balance deleveraging with a consistent dividend payout.

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2016 agenda

In its 1Q16 earnings call, the company mentioned its 2016 outlook. The company stated that it’s on track or ahead in each of the three areas of the integration program—its organization structure, zero-based budgeting, and manufacturing footprint. It targets cost savings of $1.5 billion net of inflation to be fully realized in 2017. It also expects $1.9 billion of pre-tax P&L costs including $1.1 billion in cash. It expects $1.1 billion of capital expenditure from the Kraft Heinz integration program.

With a good start to 2016, the company remains confident to see stronger EPS in 2H16 due to expected earnings accretion from refinancing its preferred stock in June. It continues to lay the groundwork for the white-space expansion of both the Kraft and Heinz brands. This expansion will be in the food service and international channels.

Kraft Heinz’s peers

The company’s peers in the industry include Pilgrim’s Pride (PPC), McCormick & Company (MKC), and Snyder’s Lance (LNCE). They reported positive year-to-date returns of 28%, 13%, and -2.1%, respectively, as of May 9. The First Trust NASDAQ-100 Ex-Technology Sector IndexSMFund (QQXT) and the First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) invest 1.5% and 1.0% of their portfolios in Kraft Heinz.


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