3 Reasons Why I Bought Stock in Kraft Foods (KRFT)

macaroni

Well, I finally opened and funded my OptionsHouse account.  I’ll write more about my OH experience later.  But for now, I’d like to talk about my first purchase using my new OH account.  I decided to go with KRFT for the following 3 reasons:

 

#1. Product Line

I follow the Buffett school of thought where an investor should understand a business and should also find companies with “moats” around them.  I feel that KRFT fits into both of these categories.

Some quick facts on Kraft Foods:

– 98% of North American households have Kraft products in their pantry or refrigerator

– $18 billion in annual sales

– 10 Kraft brands bring in more than $500 million net revenues

– Kraft has well-known brands such as Planters, Philadelphia, Kool-Aid, Oscar Mayer, Cracker Barrel, Maxwell House, Jell-O, Kraft Macaroni & Cheese and more

 

#2. Low P/E Ratio

Per Morningstar, the current P/E ratio is 13 versus the industry average of 20 and S&P average of 18.  This might be a bargain in a market where P/E ratios keep pushing higher.

 

#3. Nice Dividend Yield

KRFT currently has a yield of about 3.5% which comes out to $0.525 per quarter.

 

While KRFT probably has its own flaws, I feel comfortable in this latest buy.  I hope that KRFT will be a reliable, steady, dividend-paying stock for years to come.

Advertisements

11 thoughts on “3 Reasons Why I Bought Stock in Kraft Foods (KRFT)

  1. Hi Dear Dividend,

    Great to see there are more starters within this kind of investing, than just myself.
    I like your reasoning and agree with it as well.

    However, there are so many great Consumer Good companies like KO, PEP, MCD, WMT, etc.
    I’ll put this one on my watchlist, but I’m going to keep my portfolio as diversified as I possibly can, so this company has to wait for now.

    Keep up the good work! I’ll add you to my blogroll.

    Best wishes. DfS

    Like

    • DFS,

      Thanks for the comment. I’m definitely a “starter” and my monthly dividends are pretty low compared to some of the other bloggers out there. I have to start somewhere though.

      There are a lot of great companies out there. I wish the prices would drop a little but I’ll still invest regardless. An unofficial reason #4 I had for buying KRFT is because Mrs. Dear Dividend suggested it. Add that to the nice dividend yield, low P/E, and great product portfolio and my decision was made.

      Best of luck investing.

      Regards,
      Dear Dividend

      Like

    • agree with Dividend for Starters. I usually try to buy stock when it’s trading close to lowest of 52 weeks, this way I have some room. yes, I might miss some stocks but it gives me some peace of mind knowing it’s kind of sale. At this moment KRFT vs CAG I will get CAG.

      Like

      • HHWG,

        Thanks for bringing CAG to my attention. It wasn’t a stock on my radar before now. I like the idea of finding a stock close to its 52-week lows. Unfortunately, there aren’t my stocks on many watchlist that are close to their 52-week low.

        Thanks for stopping by.

        Regards,
        Dear Dividend

        Like

  2. All great reasons for KRFT. Basically, why I have owned them for many, many years and now continue with it and stock spin off MDLZ. Thanks for sharing.

    Like

    • I wish I had started this sooner when prices were more reasonable. Still, KRFT is a stock I’m comfortable holding onto for a very long time.

      Thanks for stopping by!

      -Dear Dividend

      Like

  3. Hi Dear Dividend,

    Looks like a well thought out purchase! I don’t recall seeing them on my initial purchase of 4 dividend stocks, as I am trying to start with solid companies that are trading with low P/E’s and recently picked up K, DE, RGR, and AFL. I hope I can make a well thought out detailed analysis as to why such as you and many other dividend investor/bloggers do so well.

    Like

    • Kipp,

      There are a lot of resources for researching stocks. I’m not a pro so I look for several factors but ultimately go with my gut. The bottom line for me is whether or not I feel like I can hold a stock that will pay dividends for 20-30 years and not worry about it completely tanking or the company going out of business.

      I bought some K also recently. The P/E is low and the company has a large product portfolio. DE seems to be popular right now as well as AFL. You’re the first person I’ve seen bring up RGR so thanks for sharing.

      Regards,
      Dear Dividend

      Like

      • Hi Dear Dividened,

        RGR had a low PE ratio, low payout ratio (something I like to see to know there is room to grow 20-30 years down the road as you said), and surprisingly the current yield is very nice as well. I also went over the balance sheet, cash flow, and income grow when looking at the investments, and RGR seems to be in good shape. Dare I say under valued with its 52-week high at almost $86.00 a share and current levels around $58 a share, it seemed to me like a good time to jump in. People here love their guns…

        Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s