Kraft Heinz (NASDAQ: KHC), like its products on the dinner table, is a staple in dividend portfolios, consistently paying a quarterly distribution since 2013. The multinational food company with brands like Oscar Meyer and Philadelphia has struggled so far in 2024 with a total return of 12.9%, falling well below the market benchmark S&P 500's return of 24.4%.
Still, Kraft Heinz's outsized dividend is enough reason to continue holding for income seekers, so let's examine how much it pays out and whether the company can continue paying it.
Here's how much Kraft Heinz pays out in dividends
Kraft Heinz currently pays a quarterly dividend of $0.40 per share, equating to an annual payout of $1.60 per share and a dividend yield of 5%. Looking ahead to 2025, while no official announcements have been made, management is likely to keep its dividend the same, just as it has in the past five years.
The company's stagnant dividend is partly due to its payout ratio -- the portion of its earnings per share paid out as dividends. At first glance, Kraft Heinz's payout ratio of 141.8% seems alarming. However, this figure is skewed by a $2.3 billion write-off in goodwill and intangible assets in 2024, driven largely by its struggling Lunchables brand, making the metric less reliable.
Considering management's adjusted earnings per share outlook for 2024, projected at $3.01 to $3.07 (excluding impairment charges), the adjusted payout ratio of 52.1% to 53.2% becomes much more palatable. Notably, recent research from Hartford Funds indicates that a 75% payout ratio serves as a critical benchmark for sustaining a healthy dividend.
Additionally, there are other encouraging signs that Kraft Heinz's dividend remains secure. Over the past three years, the company has reduced its net debt by 7.9% to $20 billion while also cutting its outstanding shares by 1.2%. These achievements highlight Kraft Heinz's capital allocation flexibility, offering reassurance to investors seeking reliable dividend income.
KHC Financial Debt (Quarterly) data by YCharts
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Collin Brantmeyer has no position in any of the stocks mentioned. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.
