We recently published a list of 8 Best Beverage Dividend Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where The Kraft Heinz Company (NASDAQ:KHC) stands against best beverage stocks that pay dividends.

Retail sales rebounded significantly in October as the economy remained stable and consumers overcame worries about a port strike and other challenges that had dampened sales in September, according to the CNBC/NRF Retail Monitor. NRF President and CEO Matthew Shay noted that consumer spending picked up again in October, supported by job growth and increased wages throughout the year. He observed that inflation remained largely confined to services, with prices for some retail goods even declining. Shay indicated that October’s sales performance had laid a solid foundation for the holiday shopping season to begin on a positive note. When we examine specific sectors, we see that grocery and beverage stores experienced a 0.87% increase on a seasonally adjusted month-over-month basis and a 3.76% rise year-over-year without seasonal adjustments.

The food and beverage industry faced significant challenges during the pandemic. While in-home consumption surged, out-of-home dining virtually ceased, leading to a substantial decline in business and severely impacting the sector. Since then, the industry has undergone numerous transformations and is now in a recovery phase. According to a Market Research report, the global food and beverages market is projected to grow at a compound annual growth rate (CAGR) of 5.9% between 2022 and 2027. The market’s growth is being driven by shifting consumer habits, out-of-town retail parks, and retail stores.

READ ALSO: 7 Best Beverage Stocks that Pay Dividends

Coffee remains the most popular beverage among Americans. In 2023, spending on out-of-home cold coffee, such as iced coffee, cold brew, and frozen coffee drinks, reached $17.7 billion—more than double the $8.5 billion spent in 2016, according to the food service research firm Technomic. Additionally, the National Coffee Association (NCA) reported that coffee consumption outside the home has returned to pre-pandemic levels as people resume visiting coffee shops and workplaces. Over a third of consumers who drank coffee on a given day did so away from home, marking the highest rate since January 2020, as highlighted in the NCA’s National Coffee Data Trends report.

Consumer behavior plays a critical role in shaping any industry, and the beverage sector is no exception. This industry is adapting to evolving preferences, with more Americans seeking alternatives to alcohol. Beverage companies emphasizing the health benefits of their products are striving to tap into this trend. According to data insights firm NCSolutions, over 40% of Americans aim to reduce their alcohol consumption in 2024, an increase from 34% the previous year. Among Generation Z, this figure rises to 61%, compared to 40% in 2023 who expressed similar intentions.

Technology stocks have been the standout performers this year, with gains of nearly 29%. While food and beverage stocks haven’t seen exceptional growth, the Food & Beverage index, which represents companies across various sub-industries in the sector, has still delivered a modest year-to-date return of 7.5%. Over the past 12 months, the index has risen by approximately 14%. In view of this, we will take a look at some of the best beverage stocks to buy.

Our Methodology

To select the best beverage stocks, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 and picked companies that are primarily involved in the production and distribution of a wide variety of liquid refreshments, including soft drinks, alcoholic beverages, coffee, tea, bottled water, energy drinks, fruit juices, sports and nutritional drinks, and dairy-based beverages. From that list, we selected 10 companies that pay dividends to shareholders and ranked them in ascending order of the number of hedge funds having stakes in them as of Q3 2024.

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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

The Kraft Heinz Company (NASDAQ:KHC)

Number of Hedge Fund Holders: 38

The Kraft Heinz Company (NASDAQ:KHC) is an American food company, based in Illinois. The company specializes in a wide range of snacks and beverages. It struggled to attract investor interest following the merger of Kraft and Heinz nine years ago. In 2019, it unsettled shareholders by announcing a $15 billion writedown on its leading brands, a reduction in dividends, and an SEC investigation into its accounting practices. Shortly after these revelations, then-CEO Bernardo Hees resigned from his position. However, the company managed to resolve its challenges under new leadership and achieved stability in its topline growth. The stock is up by a modest 4% in the past five years.

In the third quarter of 2024, The Kraft Heinz Company (NASDAQ:KHC) reported revenue of $6.38 billion, which fell by 2.85% from the same period last year. The gross profit margin rose by 20 basis points, reaching 34.2%. The company remains committed to investing in marketing, research and development, and technology to deliver solutions that create value for consumers and drive future topline growth. These efforts are supported by its established ability to unlock efficiencies and generate robust cash flow consistently. In addition, the company is committed to expanding its renowned and emerging food and beverage brands worldwide.

The Kraft Heinz Company (NASDAQ:KHC) reported a strong cash position in the most recent quarter. The company’s operating cash flow year-to-date came in at $2.8 billion, up 6.7% from the same period last year. Its free cash flow amounted to $2 billion, which showed a 9.7% growth on a YoY basis. Moreover, the company also paid $1.5 billion to shareholders through dividends in the first nine months of the year. The Kraft Heinz Company (NASDAQ:KHC) currently offers a quarterly dividend of $0.40 per share for an impressive dividend yield of 5.03%, as of November 24.

As of the close of Q3 2024, 38 hedge funds in Insider Monkey’s database owned stakes in The Kraft Heinz Company (NASDAQ:KHC), compared with 43 in the previous quarter. These stakes are worth over $12 billion in total. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder, with stakes worth over $11.4 billion.

Overall, KHC ranks 6th on our list of best beverage dividend stocks to buy according to hedge funds. While we acknowledge the potential for KHC to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. 

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Disclosure: None. This article is originally published at Insider Monkey.