Top Investment Option at the Moment: Kraft Heinz versus Coca-Cola
Coca-Cola (KO, 4.72%) might just be the better investment option right now compared to Kraft Heinz (KHC, 2.14%). But why's that the case? Let's decipher this juicy financial tale that'll help you discern which soda giant to tout in your portfolio.
Simply put, Coca-Cola's current dividend yield of 3.1% promises a tasty blend of steady growth and attractive income for investors. Plus, meriting the title of a Dividend King, it has maintained a streak of yearly dividend increases for an impressive 62 years now. On the other hand, Kraft Heinz now boasts an enticing dividend yield of 5.4%, but its share price has been underperforming lately.
Dig a little deeper, and you'll see that the real turn of events is taking place inside Kraft Heinz. While it's celebrated for its generous dividends, the company's business model has been a bit of a rollercoaster ride against the backdrop of its 2015 merger. Original plans to slash costs and boost profits seemed promising in the short term, but they also threatened the company's stability for the long haul.
However, a revised strategy has emerged where management is working to support its leading brands and gradually part with less-desirable ones. This move to regain focus has proven successful for rivals like Procter & Gamble and Unilever. But to clarify, we're not saying Kraft Heinz has entirely turned the corner just yet. Despite these efforts, some of its key brands have actually struggled more than the ones it's choosing to neglect.
In other words, Kraft Heinz is taking on an identity as a turnaround stock. As a result, any potential dividend hikes might have to wait until the company successfully navigates this transformation period. Only more aggressive investors should put their money towards this stock instead of Coca-Cola for now.
Now, let's switch our gears to the soda giant, Coca-Cola. While its current yield is somewhat lower than Kraft Heinz's, it's still comfortably above the typical consumer staple average. As far as dividend investing is concerned, investors seeking a reliable and steady income choice should find Coca-Cola's offerings appealing.
Moreover, the S&P 500 champion continues to retain its stellar track record of performance and growth. The company just goes about selling beverages really, really well, and that's what keeps consumers coming back for more. Even with a recent 15% pullback in its share price, Coca-Cola still boasts a compelling valuation in the context of its growth potential and financial stability.
So, what's the bottom line for dividend investors trying to decide between Coca-Cola and Kraft Heinz? If you cherish stability, reliable income, and a palatable dose of solid long-term growth, Coca-Cola is likely a better option for you. While Kraft Heinz's turnaround tale might yield higher returns in the future, incurring some risks along the way, the overall story favors Coca-Cola as the safer bet for long-term investors.
In terms of investing in finance, for individuals who prioritize stability and a reliable income source, Coca-Cola's dividend offerings with a comfortable yield above the average consumer staple average might be more appealing. On the other hand, if an investor is seeking higher returns and is ready to tackle some risks, Kraft Heinz, with its potential as a turnaround stock, could be an option to consider.