On Wednesday’s episode of Mad Money, Jim Cramer took a close look at why traditionally dependable dividend-paying stocks have recently been under pressure.
“When interest rates go up, even if they go up just a little, you can see lots of very good well-known stocks with juicy dividends just get pummeled. Right now, some amazing stocks, some amazing companies are just getting thrown out with the proverbial bathwater.”
READ ALSO: Jim Cramer Put These 8 Stocks Under a Microscope Recently and Jim Cramer Commented on These 6 Natural Gas Players.
Cramer questioned why companies with long-standing reputations and strong dividend payouts are being punished so harshly. He identified multiple factors contributing to the downturn, with the most significant being rising interest rates, especially in the 10-year Treasury. According to Cramer, the yield surpassed 4.5% on Wednesday. He went on to explain, “That’s the magic number where investors say, ooh, ooh, I like that piece of paper, solid yield, no risk, get me out of stocks that yield about the same and into the bonds.”
Another issue weighing on these stocks, Cramer noted, involves regulatory uncertainty. He mentioned the Department of Health and Human Services and raised concerns about Robert F. Kennedy Jr.’s role there. Cramer pointed out that it remains unclear whether Kennedy is supportive of the companies under his oversight or if he is predisposed against them. He noted that it is uncertain how much actual power Kennedy holds, but Cramer emphasized that he certainly has the ability to scrutinize these businesses.
“So here’s the bottom line: In a very uncertain tape, for what used to be called ‘safety stocks’, I’d rather just own a piece of paper like the 10-year Treasury where, if worse comes to worst, at least I get my money back.”
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during the episodes of Mad Money aired on May 14. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Jim Cramer Commented on 7 Hard-to-Own Safety Stocks
7. General Mills, Inc. (NYSE:GIS)
Number of Hedge Fund Holders: 49
Cramer highlighted that General Mills, Inc. (NYSE:GIS) might face complications regarding its cereals if Robert Kennedy Jr. decides to ban artificial ingredients.
“General Mills, which makes top drawer pet food, let’s go over that one. Incredibly popular cereals, you know them, Trix, Lucky Charms, Fruity Cheerios. When you were a kid, was there anything more fun than eating these for breakfast? I mean, they’re practically addictive for children, even for adults. I had some last week, and that’s the problem. Bobby Kennedy Jr. wants to demagnetize these cereals as well as make many other products that have artificial coloring that kids can’t resist.
The question becomes, what if he gets his way? Will kids eat Lucky Charms without those colorful hearts and rainbows? Can you imagine if you took the color out of Trix? It wouldn’t be for kids. This stock’s one point off its low, 22 points away from its high, yields 4.5%. Hmm, 4.5%. Let’s think about this. General Mills now yields the same as the 10-year Treasury. If you’re nervous, if you fear Bobby Kennedy Jr, would you fear the 10-year? Nah.
But you know what? You might fear General Mills. So why buy a company that could be in the government’s crosshairs when you can get the equivalent yield from something that’s backed by the full faith and credit of the same government that might be coming after them? I am tempted to buy General Mills, but I do fear Bobby Kennedy Jr. more than I care about how much I might make with this stock.”
General Mills (NYSE:GIS) makes and sells a wide range of branded packaged foods. Its products include cereals, snacks, frozen meals, meal kits, and pet food.
6. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 69
While Cramer praised PepsiCo, Inc. (NASDAQ:PEP), he did point out the possibility of it being on the receiving end of bans on artificial ingredients.
“Then let’s go [to] food. PepsiCo is, by all standards, an amazing company, worldwide franchises and beverages, and snacks. While its beverage business has a formidable competitor in Coca-Cola, their Frito-Lay snack business, well, come on, it’s the best in the world. I’ve never seen the stock this far from its high. It’s at $128, down from $183. It’s down to the point where it yields roughly 4.4%. But what happens if the Secretary of Health and Human Services goes after the snack business for excess salt? I don’t know because it can have excessive weight if you eat too many of them, like what else wouldn’t? Or maybe says that soda has to be a natural color, whatever color that is. Does 4.42% in yield protect you from that? Obviously, today’s sellers don’t think so, but this company’s worth a lot more than it’s selling for. I just don’t know when it stops going down.”
PepsiCo (NASDAQ:PEP) is a large company that makes, markets, and distributes a variety of beverages and snacks. The company’s products are sold under brands like Pepsi, Lay’s, Gatorade, Doritos, Tropicana, and Aquafina.
