Better High-Yield Buy: Kraft Heinz or Conagra Stock

The average consumer staples company is offering investors a roughly 2.8% dividend yield. Conagra's (NYSE: CAG) 5.1% yield is much higher than that, with Kraft Heinz's (NASDAQ: KHC) 5.4% yield higher still.

If you are a high-yield lover, these two food makers will likely have popped onto your radar screen. Which one is better? There's an easy answer.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

What do Conagra and Kraft Heinz do?

While the consumer staples sector includes companies that produce a large range of products, Conagra and Kraft Heinz are focused on making packaged foods. Conagra has a number of well-known brands like Slim Jim and Birds Eye. Kraft Heinz, in addition to its two namesake brands, owns icons like Oscar Mayer and Jell-O. The brands these companies own are staples in grocery stores.

Image source: Getty Images.

That said, what's notable here is that both are fairly large companies. Kraft Heinz's market cap is roughly $36 billion, while Conagra weighs in at $12 billion.

There are a couple of takeaways here. First, Kraft Heinz is three times the size of Conagra. But both are material businesses with strong distribution networks, large marketing teams, and the ability to create innovative new products. There are competitors that are larger, but Kraft Heinz and Conagra have been able to compete reasonably well for years.

Why are Kraft Heinz's and Conagra's yields so high?

"Reasonably well" is an important modifier here, because neither Kraft Heinz nor Conagra are firing on all cylinders today. That's not shocking per se, since all companies eventually face hardship. There is a slight difference here, though. Kraft Heinz's problems were largely self-inflicted, while Conagra's are more organic in nature.

Kraft Heinz was created via a merger of Kraft and Heinz. The goal at the time was to cut costs to enhance profits. That's a great short-term plan, but not a good long-term plan, since you can only cut costs so far before you hurt the business.

And that's just what appears to have happened. After a management overhaul, Kraft Heinz is now looking to focus on its largest, most profitable product lines while exiting less meaningful ones. That's a much better long-term approach.

Conagra, meanwhile, is a bit of a second-tier player. While it has well-known brands, few are segment leaders. And given the company's relatively small size, it is facing an uphill battle when competing with peers that simply have a greater capacity to invest in their brands. Conagra is attempting to upscale its portfolio, but it is a long-term, slow-moving process.

To put all that into a single thought, the key reason for the high yields in both situations is financial performance that is lagging behind the broader food industry.

Why Conagra is a better choice

That said, there's a very distinct difference in performance. Kraft Heinz is honing in on a collection of its most important brands. Only organic sales growth in those brands fell in the third quarter, while organic sales of the brands it isn't focusing on as much grew.

That's not a great showing, and it helps explain why Kraft Heinz's dividend has been stuck at $0.40 per share per quarter since it was cut in 2019. It seems likely that the dividend is going to remain stagnant until the company starts to make more progress in what is likely to be a multiyear turnaround effort.

Conagra isn't exactly hitting it out of the park, either. In the fiscal second quarter of 2025, adjusted earnings fell 1.4%, with overall sales off by 0.4%. That's not terrible, but it's not exactly good, either. That said, organic sales inched up 0.3%, with CEO Sean Connolly highlighting the company's strong market share performance in the quarter.

There are still headwinds to deal with, but it looks like the moves Conagra's management team is making are having a positive impact. And, notably, Conagra has now increased its dividend for five consecutive years.

It's about the risk/reward balance

Kraft Heinz and Conagra are both likely to be less desirable options for risk-averse income investors. But if you are willing to take on a bit of uncertainty, it appears that Conagra is performing better right now. And while Conagra's dividend hasn't been increased in seven quarters, which makes a dividend increase in 2025 mandatory if the company wants to keep its annual dividend streak alive, the turnaround effort just seems more developed than the one unfolding at Kraft Heinz.

Both companies are probably going to figure out how to survive, but Conagra seems like it is slightly ahead on that process today. And that will probably make it a more attractive income stock for investors willing to step into a high-risk/high-reward situation.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $307,661!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,088!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $536,525!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Learn more »

*Stock Advisor returns as of February 3, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.