Kraft Foods (KFT) is one of the forgotten Dogs of the Dow for 2012. The stock has not moved much from the start of the year, opening 2012 at $37.95, reaching a high of $39.99 on May 1st and now sitting in the high $38 range. With a dividend of $1.16 a year and a yield of 3%, Kraft is a solid dividend payer, though with the lack of stock appreciation, and a beta of 0.53, it is not exciting.
However, there may be some exciting news ahead for Kraft. Its projected earnings for 2012 and 2013 are $2.52 and $2.78 respectively, the first time it has eclipsed the $2 EPS value. That would set a forward PE of around 15.50, not too shabby. Another positive for Kraft is that it beat analysts projections for four of the last five quarters. However, I think there are better food companies available to invest in, based on PE, dividend yield and proximity to a 52-week high.
ConAgra Foods (NYSE:CAG) currently trades around $25 a share, in the middle of its 52-week range. Let me highlight the positives that ConAgra has going currently. ConAgra's EPS has increased for five straight years, and it finished last year with an EPS of 1.90. That equates to a PE of just over 13, better than what Kraft is showing, even in a forward PE prospective. ConAgra has also been buying back stock over the last many years, decreasing the number of outstanding shares from 537 million in 2002 to around 410 million today. The other interesting fact about ConAgra is that the stock is trading for around the same value it was in May 2002, $25 a share. The one negative I can see here is that the EPS for 2012 is projected to be a little below 2011, estimated at $1.77, but then growing to $1.93 for 2013.
HJ Heinz Company (HNZ) is approaching a 52-week high, and if the stock price increases a few dollars more from its $53.55 value, it will reach an all-time high. Heinz just posted "year-end" earnings, and announced a 7.3% dividend increase, to $2.06 yearly, or about a 3.85% yield. This marks nine straight years that Heinz has raised the dividend since cutting it in 2003. With EPS estimates increasing to $3.59 for this current year and $3.93 for the May 2013 - April 2014 year, I would tend to believe that the generous increases in the dividend will continue here for Heinz.
Kellogg Co (NYSE:K) is actually sitting closer to its 52-week low, than its high, with the stock at just over $50 a share, and having a range of $48-$57 over the last 52 weeks. Kellogg has very strong numbers for shareholders, including increasing EPS every year for the last 10 years. It also shares a similarity with ConAgra, as it has reduced the amount of common stock on the market from 413 million shares in 2005 to 357 million today. Kellogg has also had a long history of raising the dividend, which now sits at $1.72 per year, which equates to just under a 3.5% yield. Kellogg has a PE of just below 15. The one red flag about Kellogg that I can see is for the first time in a long time, it may not be able to increase EPS year over year. Projected EPS for 2012 is down a couple cents to $3.35, then back up to $3.62 for 2013.
General Mills Inc (NYSE:GIS) is almost a mirror image to rival Kellogg. The stock though is sitting in the higher end of the 52-week trading range, at about $39 a share. The trading range is $34.64-$41.06 a share. General Mills also has a slightly smaller dividend yield of 3.13%. General Mills has been increasing the dividend at a very similar rate as Kellogg. Also General Mills is showing some earnings growth for 2012 and 2013, with EPS increasing from $2.48 last year, to $2.54 this year and $2.76 for 2013. General Mills has a PE of just over 15.
Conclusion: Kraft was selected as one of the Dogs of the Dow for 2012. Historically the Dogs have outperformed the market. I am a believer in the Dogs, but not selecting all 10 and hoping for an out performance of the market. In my opinion, Kraft is the real dog of this group. All of these other companies provide better growth, PE ratios, dividend payouts and I believe future stock appreciation and gains for your portfolio. One other thing to ponder is the projections of corn prices to fall this year and possibly tank, which caused another sector that I research heavily and believe in, the fertilizer stocks, to fall big. If you believe that corn will fall, or if you want to maybe hedge your bets a little on fertilizer, these stocks may be right for you. Lower corn prices will equate to lower input costs for all of these companies, as they either use corn in their products, or may buy meat, which could be fed off of corn and grains. Retail prices of food products rarely decrease, so the bottom line of these companies could grow even more than projected. If I had to pick a pair of stocks from this list, I would pick Heinz and ConAgra, Heinz for the income and dividend growth and ConAgra for its high yield currently and possible stock appreciation in the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.