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.

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