Kraft Heinz Pauses Its Breakup Plans. Should You Buy the High-Yield Dividend Stock Here?

After Kraft Heinz (KHC) announced that it would postpone its breakup into two entities and spend $600 million to improve itself, I believe that the moves could potentially help the company in the longer term. Still, Berkshire Hathaway (BRK.A) (BRK.B), which owned 27.5% of KHC as of January, may still decide to unload its entire stake in the packaged-foods giant, putting a great deal of downward pressure on its shares.

Moreover, Kraft Heinz reported discouraging fourth-quarter results, and multiple macro trends are weighing on the name. For all of these reasons, I would not recommend buying KHC stock at this point, despite its high dividend and low valuation.

Kraft Heinz, as its name indicates, owns and markets the Kraft and Heinz brands. Based in Chicago and Pittsburgh, it also owns many other consumer packaged food brands, such as Oscar Mayer, Jell-O, and Philadelphia Cream Cheese. The company has a market capitalization of $29.36 billion.

Last September, the firm announced that it would split itself into two companies, with one entity focusing primarily on “sauces, spreads and seasonings.” The other spun-off firm was going to include the Oscar Mayer, Kraft Singles, and Lunchables brands. But in January, Kraft Heinz’s new CEO, Steve Cahillane, stated that KHC would postpone the split to focus on “returning the business to profitable growth.” The CEO indicated that the company would stay united for all of 2026.

In Q4, the food giant’s sales dropped 3.4% versus the same period a year earlier to $6.35 billion, while its operating income, excluding certain items, tumbled 15.9% year-over-year (YoY) to $1.16 billion. Also falling was its adjusted gross profit margin, which dropped 1.3 percentage points to 33.1%.

The shares have a forward price-earnings ratio of 11.9 times, and analysts on average expect its earnings per share to fall 21.5% in 2026 to $2.04, versus the EPS of $2.60 that it generated in 2025.

As I reported in my last column on KHC, the many consumers who are concerned about their health have been purchasing fewer of the company’s products, a high proportion of which are not very healthy. Therefore, I believe that Kraft Heinz can use a portion of the funds that it intends to invest in its U.S. business to develop new, healthier products and market them to U.S. consumers. The firm could also launch new products, enter new markets, and potentially make sizeable acquisitions in emerging markets, where its sales rose an impressive 4.6% last quarter, excluding the impact of acquisitions and divestments.

In 12 to 18 months, these investments could begin helping the company. But on the other hand, they may not move the needle for KHC stock during that time frame.

Potentially exacerbating Kraft Heinz’s problems with health-conscious consumers, the GLP-1 weight-loss drugs, by giving individuals greater control of their eating habits, are meaningfully lowering consumption of snacks. Further, the company noted in its Q4 earnings release that it had faced “inflationary pressures in commodity and manufacturing costs that outpaced (its) efficiency initiatives.” With inflation in the U.S. still running fairly high, the latter trends are likely to continue to weigh on the firm’s profitability. Finally, amid high inflation, many cost-conscious consumers have been buying cheaper store brands instead of Kraft’s offerings, and that trend could continue or even intensify.

Meanwhile, Warren Buffett, Berkshire’s former CEO and current chairman, said last year (when he was still CEO) that the merger between Kraft and Heinz “certainly didn’t turn out to be a brilliant idea” and did not state that Berkshire would avoid selling its KHC stock. Moreover, Berkshire last month in an SEC filing disclosed that it could sell up to 99.9% of its stake in KHC. Although Berkshire’s current CEO, Greg Abel, effusively praised Kraft Heinz’s decision to postpone its separation, he also did not appear to have committed to Berkshire retaining its stake in the food conglomerate. Therefore, Berkshire could very well decide to sell most of or a significant portion of its KHC stock.

Kraft Heinz has a relatively low valuation and a high dividend yield of 6.6%. But the company could drastically lower its dividend down the road, and it’s still facing multiple adverse macro trends, while it reported weak Q4 results, and Berkshire may unload most of its stake in the company. Further, given the company’s challenges, there’s a good chance that its turnaround efforts may not boost its stock. As a result of all of these factors, investors should avoid holding KHC stock at this point.

On the date of publication, Larry Ramer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com