A Dividend Stock for the Slightly Daring

Kelley is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

It seems like most of the stock news out there these days is centered around European risk and the move to dividend paying stocks. I can understand why people are setting up shop in dividend payers. Watching the stock market this year has been a bit like watching a see-saw competition. The move to low risk dividend payers is abundantly evident when one looks at McDonald’s (NYSE: MCD) stock price, which keeps bumping up against its 52-week high.

I like large, secure, dividend paying companies as much as the next person, but I also like to invest in companies that have something interesting on the horizon. This is how Kraft Foods (NASDAQ: KRFT) ended up on my watch list.  Kraft is a large blue chip stock that pays a handsome dividend and, due to its upcoming spin-off (sometime in 2012), I think it has some potential that other dividend stocks don’t have.

Kraft is a behemoth. Its list of brands is too long to list and covers everything from cream cheese, to lunch meat, to gum. The spin off is going to divide the different brands into two companies, one that would focus on snacks and have a growing global component, while the other will have the more stable, slower growing, American grocery focus. I think that this will be a great move for all involved. The split allows for a divided marketing focus and a division of products which have become so diverse, they practically hit every shelf at the grocery store. Kraft has been at the high end of its 52-week range lately, but unlike other dividend stocks at the high end of their range, this one may be on the verge of unpacking some long term potential. Even Warren Buffett, Kraft's largest shareholder, supports the split.

Everybody loves a dividend paying stock, and thanks to Joel Greenblatt we have also come to love spin offs, so what could be better then the two for one deal that Kraft is offering? Kraft is an ungainly beast that I think might become a bit more agile (despite a diet of Mac and Cheese). Anyone looking to add a little zest to their list of dividend stocks might want to check out Kraft.

Kelley Ryan doesn't own any shares of the companies mentioned.

blog comments powered by Disqus