Kraft (KFT): A Tasty Dividend Appeal

Food giant Kraft (KFT) penetrates 99% of American households, and with a dividend yield approaching 4%, it should penetrate 99% of conservative investor portfolios!

A high dividend portfolio is not complete without the inclusion of a world-class food manufacturer. Apart from their defensive qualities, these companies very often are highly cash generative and have established quality brands over many years.

One such company is Kraft Foods (KFT) which trades on a historic dividend yield of 3.9% and a price to earnings (PE) multiple of around 14 times.

Some of its highly recognizable consumer brands include Oreo, Chips Ahoy!, Dentyne and Starbucks Coffee. Following the acquisition of Cadbury, it became the world’s second largest food group with annual turnover of $48 billion (behind Nestle).

Recently reporting second quarter earnings, the group said revenue climbed 25% to $12.3bn for the quarter while diluted earnings per share were up 13% to $0.53. This rise in earnings was helped primarily by the acquisition of Cadbury.

Cash on hand at the group also rose from $2.1bn in December 2009 to $2.8bn in June 2010.

The company believes it is making excellent progress on the Cadbury integration and expects to realize even greater synergies. The company also gave a firm commitment that the group would deliver "at least $2.00" of operating earnings per share this year "while building a stronger foundation to achieve top-tier growth in 2011."

The company's largest shareholder at present with 8% of the issued stock is Berkshire Hathaway, the company managed by highly regarded investment manager Warren Buffett.

According to the company, its products feature in 99% of American households which indicates how strong its brands have become. Coupled with its attractive yield, cash generation and the fact that more than 80 percent of revenues come from products that hold the number one market share position in their respective categories, it would be hard to exclude Kraft (KFT) from your portfolio.

 

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