2024 was a phenomenal year for broader indexes like the S&P 500 and Nasdaq Composite. But not all stocks joined the party.
Kraft Heinz (KHC 1.00%), Kenvue (KVUE +0.58%), and Middlesex Water (MSEX 0.10%) sold off last year, which has pushed their yields to attractive levels for investors looking to jolt their passive income.
In fact, investing in equal parts of each dividend stock produces an average yield of 4%!
Here's why all three dividend stocks are worth a closer look now, especially for value-oriented investors.
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Kraft Heinz is a bargain at multiyear lows
Daniel Foelber (Kraft Heinz): Kraft Heinz is hovering around a four-year low -- coming off an abysmal 17% decline in 2024 and a poor start to 2025.
NASDAQ: KHC
Key Data Points
The Warren Buffett dividend stock's yield has ballooned to 5.5%, making it an intriguing high-yield dividend stock. But wise investors know that a dividend is only as reliable as the company paying it. And Kraft hasn't exactly been at the top of its game.
The company's revenue has been in decline, but margins have remained at strong levels. In its third-quarter earnings release, Kraft said it now expects organic net sales to be down 2% to flat versus the prior year, which was at the low end of its guidance range. Adjusted operating income and adjusted earnings per share (EPS) are also expected to be at the low end of guidance, or a 1% to 3% increase.
In short, the business is barely growing, which isn't exactly a vote of confidence for long-term investors. After all, the essential objective of long-term investing is to select quality companies that will be worth more in the future than they are today by growing earnings, and possibly dividends as well.
Although Kraft isn't growing, it is generating plenty of earnings to pay a sizable dividend and repurchase stock. Its full-year adjusted EPS earnings estimate is $3.01 to $3.07 per share compared to a $1.60 per share forward dividend. So the existing dividend is affordable. However, investors shouldn't expect raises anytime soon.
Kraft slashed its quarterly dividend from $0.63 per share to $0.40 per share in 2019 and has kept it there ever since. With the yield already high and the business stagnating, the priority is rightfully going toward returning to growth rather than pouring more money into the dividend expense.
Kraft is a solid choice for investors looking to scoop up a dirt-cheap value stock with a high yield. The forward price-to-earnings ratio has plummeted to the single digits at just 9.6. So despite the lack of growth, Kraft's diversified lineup of brands and attractive dividend make it worth a closer look for contrarian investors.
A classic value stock in a household name
Lee Samaha (Kenvue): The Johnson & Johnson spin-off Kenvue hasn't had the best start to life as an independent company since it hit the market in 2023. The stock declined slightly in 2024 and trades at a discount to nearly its entire peer group based on comparing its current enterprise value to its projected future earnings before interest, taxation, depreciation, and amortization (EBITDA).
KVUE EV to EBITDA (Forward) data by YCharts
The reason for the valuation discount is the operational underperformance of its skin health and beauty segment, which includes brands like Neutrogena and Aveeno. Sales are down 3.2% year over year in the first three quarters of 2024, and management is candid that it's not performing in line with expectations.
But here's the thing: Kenvue's other segments, self-care (Tylenol, Calpol) and essential health (Listerine, Band-Aid), are growing well. For example, essential health sales for the first three quarters of 2024 rose 5.7%, on top of a 3.9% increase in the same period of 2023. Meanwhile, self-care sales were up 1.5%, on top of a 12% increase in 2023.
In addition, it's worth noting that the skin health and beauty segment is the smallest income-generating segment at the company (16.1% of income in the first three quarters of 2024), and Kenvue trades at 17 times forward earnings estimates with a near 4% dividend yield. As such, Kenvue is a classic value stock candidate. The valuation and yield protect the downside, and the stock has upside potential if management can improve in-store presence and marketing, notably with Neutrogena, and keep it in line with its plans.
Middlesex Water is a regal approach to boosting your passive income stream
Scott Levine (Middlesex Water): While the S&P 500 soared more than 23% in 2024, not every stock locked in a gain for the year. Shares of Middlesex Water, a water utility with operations located in New Jersey and Delaware, headed in the other direction and ended the year having plunged almost 20%.
This recent decline is hardly the stock's first experience navigating and overcoming choppy waters -- the company has been in business since 1897. And even more impressively, the company has hiked its dividend for the past 52 consecutive years, earning it the title of Dividend King.
Consequently, dividend-hungry investors now have an excellent opportunity to pick up shares of Middlesex Water and their 2.6% forward-yielding dividend on the cheap.
After sliding in the first quarter, shares of Middlesex Water rebounded in the middle part of 2024. The end of the year, however, found investors clicking the sell button on Middlesex Water as the stock fell almost 20% in December. Ironically, the company hadn't reported any concerning news to justify the stock's sell-off. In fact, Middlesex Water had reported strong third-quarter 2024 financial results in October, including a 43% year-over-year increase in diluted earnings per share.
Middlesex Water primarily operates in regulated markets. Over the past three years, its regulated business has accounted for an average of 92% of revenue and 93% of net income. This means that management has excellent insight into future cash flows, helping it to plan for capital expenditures such as dividend payments. This suggests that the company may not be ending its streak of consistent dividend raises anytime in the near future.
Currently, shares of Middlesex Water are trading at about 13.4 times operating cash flow, representing a steep discount to their five-year average cash-flow multiple of 25.1. With this water utility stock sitting in the bargain bin, today seems like a great opportunity for income investors to click the buy button on Middlesex Water.
