Kraft (KRFT)

[Horace Cugle]

I have a position in KRFT I started last fall around $47. It has been as high as $58 but that was a momentary thing, it typically danced around $56 the last few months. It's under $52 now.

I'm not unhappy with that because I bought it for dividend reinvesting and on the hopes it might become a cash cow like MO with yearly dividend increases that make an impact. I wasn't expecting anything ridiculous like 15% raises, but hoping for 7%-8% DG for the next 5-10 years. Maybe a hair aggressive but not unrealistic, IMO.

Just reviewing some data on yahoo shows EPS estimates at $2.82 for 2013 and $3.21 for 2014. That's 14% earnings growth! Do I believe it, I don't know but I want to. 5 year forward estimate is 6.5% earnings growth. That doesn't bode well for my hope of 8% dividend increases. I don't explicitly trust yahoo data either, I often find mistakes.

But the fact is there's nothing that leads me to believe they'll raise the dividend at all; old KFT didn't do anything with its dividend. So maybe I'm banking on a bunch of hope, and as we've all found out, hope doesn't cut it if you can't back it up with something.

If you buy KRFT today you get a 3.86% yield and a big question mark on the dividend growth. If it grows the dividend as I hope it'll be a good stock to hang onto, if it becomes a 3% dividend grower then I don't think there's much point to holding it long term unless you just want an average performer or some ballast.


Feel free to straighten me out on KRFT. I want to love this stock but right now I'm just not feeling it.

[Ok Red]

Well, if you're worried about price stability it is a good defensive stock in uncertain times. And 3.86% is pretty juicy if you need the income right now.... although 10 year treasuries are now close to 3% with no risk (and no dividend growth). Looks like past 5 year EPS growth rate is 0.1%. mmmmk. Revenue growing at 1.5%. mmmmk. 3.86% might be all you get...

[Horace Cugle]

Exactly. I guess we'll just have to wait and see but it's looking more like an average performer with good defensive qualities to me.

[Horace Cugle]

Yesterday's news....

http://www.bloomberg.com/news/2013-10-01...cmpid=yhoo

I guess I was hoping for 7% but this will do. With MCD and now KRFT with somewhat skimpy raises, does anyone have concerns that KO might disappoint?

[Kerim]

(10-02-2013, 11:11 AM)Horace Cugle Wrote: does anyone have concerns that KO might disappoint?

I certainly wouldn't be surprised if the KO raise was smaller, percentage-wise, than recent years. But I think Q3 earnings will signal how things are going. Just guessing, I'd say we'll see something from KO in the 7 to 8 percent range. I'd be fine with a higher raise, of course, but it would come by raising the payout ratio, and not because earnings are rising fast.

[Horace Cugle]

I don't own KO but have been considering it here at the low end of it's recent range. I don't know why but it has never appealed to me over the years, my loss because the company sure does get a lot of love. I'm in no hurry to own KO, especially if the dividend increase might be smaller than expected. Keeping an eye on it for now.