Kraft Foods Offers Delicious Products and Tempting Dividend

NEW YORK (TheStreet) -- Once, there was a food company called Kraft Foods. Then, in August 2011, it announced it would split into two entities, Kraft Foods (KRFT) and Mondelez International (MDLZ).

I've been following the "new" Kraft ever since. Its shares are up over 5% for the year to date as of the Wednesday close of $56.73.

Once the split was completed in October 2012, Mondelez held the former Kraft's global snacking and food brands. Its portfolio includes several billion-dollar brands including Cadbury Nabisco and Oreo biscuits, Tang powdered beverages and Trident gum.

Even without the snack foods, the current iteration of Kraft Foods is still one of North America's largest consumer packaged food and beverage companies, with a market cap of about $33.75 billion and annual revenue of more than $18 billion. Here's a good place to show you a chart of KRFT that paints a positive picture for both potential shareholders and those fortunate enough to have held the stock for the past 12 months.

KRFT Chart
KRFT
data by YCharts

With the spirit of a startup and the soul of a powerhouse, Kraft still has an unrivaled lineup of products in the beverages, cheese, refrigerated meals and grocery categories. The company's iconic brands include Kraft, JELL-O, Kool-Aid, Oscar Mayer and Velveeta.

It's plain to see why Kraft continues to post the kind of key financial numbers that makes its rivals drool with envy. Its trailing 12-month operating margin at the end of 2013 was nearly 27%.

As of Dec. 28, 2013, its Return on Equity was an amazing 62% and its revenue per share was $30.67, equaling annual revenue of $18.22 billion, according to the company's financial report.

When it reports its first quarter 2014 numbers on May 1 after the market closes I'm expecting similar EPS numbers from the year-ago quarter and a slight drop in revenue.

Any disappointing results may allow shares of Kraft to retreat towards its Feb. 5 low price of $50.54. That would be an 11% drop from the closing price on April 16 of $56.74. From my vantage point that is an unlikely scenario, but a 5% drop wouldn't surprise me if the May 1 numbers fall short.

If the company maintains its annual dividend of $2.10 it may serve as support for shares of Kraft once the dividend yield-to-price exceeds the 4% level. That could place a floor under the stock of around $53, which I believe is a promising entry level for new buyers or those who've been waiting to scoop up shares on sale.

The 52-week high of $58.76 would be my initial 12-month price target. Based on Kraft's forward guidance to be delivered on May 1, that target may be low. My research indicates accelerating earnings growth during the second and third quarters of 2014. Depending on what we learn from the conference call a $60 price target might be more realistic.

Things could end up nicely for shareholders who wait to buy at lower price levels to collect close to a 4% dividend while patiently waiting for better quarterly outcomes later this year. Even at $56 per share the dividend yield-to-price is a tempting 3.75% assuming the company doesn't change its dividend payout.

If you're not already a Kraft Foods shareholder consider adding it to your wish list at a price that makes sense to you.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Google+

Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

More from Opinion

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

Musk Goes on Unoriginal Media Tirade

Musk Goes on Unoriginal Media Tirade

What's Happening in Video Games This Week: On the Road to E3

What's Happening in Video Games This Week: On the Road to E3

Wednesday Wrap-Up: Let's Talk About General Electric

Wednesday Wrap-Up: Let's Talk About General Electric

Week of the Women From Finance to Fast Food

Week of the Women From Finance to Fast Food