Is Warren Buffett About To Dump The Highest-Yielding Dividend Stock In Berkshire Hathaway's Portfolio?

Warren Buffett has affinity for dividend stocks, and Kraft Heinz (NASDAQ: KHC) is the highest-yielding dividend stock in his portfolio. Unfortunately for Buffett, Berkshire Hathaway (NYSE: BRK.A, BRK.B) took a $3.76 billion loss on its stake in Kraft Heinz in Q2. 

Could that lead to Buffett dumping Kraft Heinz entirely? Kraft merged with Heinz in 2015 to become one of America’s largest food and beverage manufacturers. Both names are instantly recognizable all over the world for mayonnaise and ketchup. 

Don’t Miss:

That is not the limit of major brands under the Kraft Heinz umbrella, which also includes Velveeta, Oscar Mayer, and Philadelphia Cream Cheese. Berkshire began investing in Heinz in 2013, and its shares were transferred to Kraft Heinz after the merger. It looked like a perfect marriage at the time. 

Heinz ketchup and Kraft mayonnaise can be found in pantries or refrigerators worldwide. That’s why Berkshire’s investment in Kraft Heinz looked like a classic buy-and-hold play. It aligned with Buffett’s philosophy of investing in iconic brands with a strong market share, such as Coca-Cola (NYSE: KO) and Chevron (NYSE: CVX). 

Kraft Heinz is currently paying a 5.97% dividend, which is a very respectable yield by any definition. However, a deeper look at Kraft Heinz may explain why major shareholders could be looking to push the eject button.

Trending: ‘Scrolling To UBI’ — Deloitte’s #1 fastest-growing software company allows users to earn money on their phones. You can invest today for just $0.30/share.

Today’s Best Finance Deals

Kraft Heinz’s dividend seems impressive at first glance, but it hasn’t resulted in the same payout Kraft Heinz shareholders have grown accustomed to. That’s because Kraft Heinz stock has been mired in a deep slump since August 2024, when it was trading in the $35 range. The yield for 2024 was 4.73%, but Kraft Heinz stock closed out the year trading around $30 and paid around $1.41 per share. 

Kraft Heinz shares hit a 52-week low of $25.53 in early July and then rebounded to $28.68 before retreating to around $27 in recent sessions. The 5.97% dividend is impressive on paper. However, passive income investors can’t rely on a high-yield dividend if the company’s share price doesn’t pull out of its slump. Unfortunately for Kraft Heinz, there is no easy way out of its current difficulties.

Yes, the company’s main products have a strong market share, but the underlying business fundamentals are working against Kraft Heinz. Kiplinger estimates that Kraft Heinz took on $33 billion in debt to complete their $45 billion merger, and it also reports that $20 billion of that debt remains unpaid. That kind of debt load can become an anchor on any company’s stock, including Kraft Heinz.

See Also: These five entrepreneurs are worth $223 billion – they all believe in one platform that offers a 7-9% target yield with monthly dividends

The debt’s negative effect on Kraft Heinz’s stock performance becomes even clearer when examining its stock-price performance since the merger. Kraft Heinz shares were trading around $46 in the honeymoon period after the merger and peaked in the $90 range in mid-2017. Since then, its share price has plunged nearly 70% to the current level. All things considered, it’s not a pretty picture, even with a dividend approaching 6%.

There is even speculation that Kraft Heinz could be headed for a breakup. With all that swirling in the background, it’s not hard to see why Buffett and Berkshire Hathaway may be preparing to liquidate its Kraft Heinz shares, or at least a large portion of them. A massive stock dump by Berkshire could be the straw that broke the camel’s back. 

Read Next: $100k+ in investable assets? Match with a fiduciary advisor for free to learn how you can maximize your retirement and save on taxes – no cost, no obligation. 

Image: Shutterstock