12/31/2012

Kraft Foods Group Shares Are New In Our Dividend Yield Passive Income Portfolio

Kraft Foods Group (KRFT)
New Dividend Stock For The Passive Yield Income Portfolio
Last Friday I put 40 Kraft Foods Group shares into the dividend yield passive income portfolio (DYPI) at cost of $44.41 per share. The total amount was $1,778.

Kraft Foods is the major diversified food company within in the United States. Roughly 20% of sales are generated outside the United States.

The shares are weighted at 1.7% of the total yield income portfolio and they will generate an annualized dividend income of 76 bucks per year. The total income is now around $700 per year. My investment costs were $18,000 and the yield on cost is 3.68%.

The portfolio was funded with $100,000 virtual, 3 months before and has now 13 stock holdings. I tried to put every Friday one stock into the portfolio. The efforts are not very high. The stock has normally a strong brand and good dividends or something else that sells. Buy Big Dividend Stocks is one of the head points.

What I try to do is to invest money into mid-yielding stocks, stocks with a dividend yield of around 2-4%. It is hard to find stocks that pay a yield over 3% and have a high-quality and proven business model.

Because the portfolio is 1.45% down since I funded it, the current portfolio yield is 3.72%. That is a bad performance you would say. You are right for the time being. But the strategy is to buy slowly and over long period. Returns are realized over a long investment horizon and not over month and hours.

If you want to get quick rich you should avoid buying stocks, penny stocks high-yields or something else. You should play with the money in Las Vegas. Or start to work - Your payments per hour are much higher.

But this is not the philosophy of a smart investor. Wise investors invest their money into great companies with growth potential that is fairly priced. If you are an anxious investor, please put your money in value stocks with growth potential. Dividends will come from alone if your company is managed by trustful employees. Finally, the time brings the return.

Until the end of next year 2013, I like to increase the amount of stock holdings to 52 - 70 in total. This should be realistic. All I need to do is to buy one stock the week. If I should realize this, the full dividend income should be around $3,500 per year.

So why did I bought Kraft Foods shares for the dividend yield passive income portfolio?

There are several reasons for the buy. Kraft Foods manufactures and markets food and beverage products, including convenient meals, refreshment beverages and coffee, cheese and other grocery products, in the United States and Canada, under a stable of iconic brands. The Company's product categories span breakfast, lunch and dinner meal occasions, both at home and in foodservice locations. It sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, drug stores, gasoline stations, value stores and other retail food outlets in the United States and Canada.

The first reason is that the dividend yield is around 4.5%. That's a pretty high figure for a food company with great value and strong brands. In addition the new Kraft Foods Group is one of the biggest food players in North America. The company is nearly dept free and has enough potential to be a consolidation leader.

Kraft Foods Group generates roughly 2.6 billion cash from operating activities at 400 million capital expenditures. Calculated on this amounts I expect that the company will become around 4 billion in debt in order to finance further growth, repurchase own shares or even to increase dividends.

If we take a look at competitors like Heinz General Mills or Campbell Soup we could see that the evaluation is not cheap but also not expensive. The reason why KRFT shares are cheaper than the competitors is the low amount of dept.
The current P/E ratio from Kraft Foods is 13.53. Heinz has a P/E ratio of 17.94, General Mills P/E ratio is at 14.78 and Campbell Soup is traded at 14.65 times of earnings.

I've no idea how fast the company can grow in the near future. For the next five years, earnings per share are expected to grow by 6.3%. That's one of the top values from peer.

What do you think about Kraft Foods? So you believe in future of the company and was the spin-off into Kraft Foods Group and Mondelez a wise decision? Let me know and leave the comment in the box below.

Here is the full portfolio:

Sym
Name
P/E Ratio
Dividend Yield

Buy
# Shrs
Income
Value
TRI
Thomson Reuters C
N/A
4.47

28.90
50
$64.00
$1,443.50
LMT
Lockheed Martin C
10.48
4.54

92.72
20
$83.00
$1,809.00
INTC
Intel Corporation
8.82
4.3

21.27
50
$43.50
$1,018.50
MCD
McDonald's Corpor
16.49
3.28

87.33
15
$43.05
$1,305.00
WU
Western Union Com
6.62
3.18

11.95
100
$42.50
$1,332.00
PM
Philip Morris Int
16.53
3.97

85.42
20
$65.58
$1,649.41
JNJ
Johnson & Johnson
22.76
3.45

69.19
20
$48.00
$1,389.00
MO
Altria Group Inc
16.2
5.47

33.48
40
$68.00
$1,240.40
SYY
Sysco Corporation
16.71
3.44

31.65
40
$43.20
$1,250.00
DRI
Darden Restaurant
12.7
4.19

46.66
30
$55.80
$1,333.49
CA
CA Inc.
11.06
4.59

21.86
50
$50.00
$1,085.50
PG
Procter & Gamble
18.7
3.29

68.72
25
$55.28
$1,677.75
KRFT
Kraft Foods Group
13.56
1.13

44.41
40
$20.00
$1,778.00
















$681.91
$18,311.55
















Average Yield
3.72%
















Yield On Cost
3.68%

2 comments:

  1. Anonymous12/31/2012

    Kraft is now able to focus on profitable growth and on returning cash to investors. This can already be seen in its laser-focused dividend policy. For example, the new Kraft pays a richer annual dividend ($2 versus $1.16 per share) and has a better yield (4.4% versus 3%). In addition, the new Kraft is committed to 5-9% annual dividend growth, while the old Kraft had hiked the dividend only twice in the last five years. To be fair though, the company rarely raised dividends because it was too busy with its aggressive overseas expansion, which consumed large amounts of cash flow each year (Kraft plowed back billions into international acquisitions -- such as its $10 billion purchase of Cadbury-- and expansions in Europe and Asia.)

    ReplyDelete
  2. Food Stuff Investor12/31/2012

    Income investors should find plenty to like about the new Kraft. As more focused firm, it is able to invest in the growth of its dominating brand names, but without the lavish spending or bureaucracy that hindered before the spinoff. In addition, Kraft shares appear reasonably priced currently, with a price-to-earnings (P/E) ratio of 14, below the average P/E ratio of 18 for food industry peers.

    ReplyDelete

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