Kraft-Heinz (KHC 1.10%) has been a disappointing investment since it was formed nine years ago from the merger of Kraft and Heinz. Shares of the combined company opened at $48.55 on July 6, 2015, but are now trading just under $36.

Kraft Heinz was initially considered a stable blue-chip consumer goods stock, but it rattled investors in 2019 with a $15 billion writedown on its top brands, a dividend cut and the announcement of an SEC investigation into its accounting practices. Then-CEO Bernardo Hees resigned a few months after those announcements.

Image source: Getty Images.

Hees’ successor, Miguel Patricio, led the company through difficult times until he stepped down last year and handed the reins to Carlos Abrams-Rivera. Under these two CEOs, Kraft Heinz stock has stabilized, rising about 14%. While it’s still well below its opening price, I believe it’s worth buying for five simple reasons.

1. Kraft Heinz has overcome its previous problems

When Patricio took over, many of Kraft Heinz’s brands were in trouble. Consumers were moving toward healthier foods, and large grocery chains were becoming fierce competitors with their own private label brands. Instead of streamlining its portfolio, refreshing its products, and launching new marketing campaigns to ward off these threats, Kraft Heinz’s management focused too much on cost cutting and share buybacks to boost earnings per share (EPS).

But under Patricio, Kraft Heinz divested its weaker brands to raise cash, acquired higher-growth brands and refreshed its classic brands with new products and marketing campaigns. These strategies put the company in a good position for growth in 2020 and 2021, when the COVID-19 pandemic prompted more people to stock up on packaged foods. The company also countered inflationary headwinds in 2022 and 2023 with gradual price increases.

2. Sales growth has stabilized

Kraft Heinz’s net sales growth – which includes divestitures, acquisitions and currency fluctuations – has been uneven over the past five years. However, organic sales have remained positive over the past four years as the company reorganized its brand portfolio.

Data source: Kraft Heinz.

The company expects its organic sales to decline 0 to 2 percent this year as it no longer has room to increase prices in its international developed markets. This pressure is offsetting successful price increases in North America and international emerging markets.

This slowdown may seem like a warning sign, but growth should accelerate again when inflation finally subsides. The company has also been expanding its out-of-home segment with new products for restaurants and businesses, refreshing its older brands with new products, and considering divesting Oscar Mayer to further streamline its organic growth. Currently, analysts expect net sales to grow at a slow but steady compound annual growth rate (CAGR) of 1% from 2023 to 2026.

3. Kraft Heinz’s gross and operating margins are increasing

Both Kraft Heinz’s gross and operating margins were squeezed by inflation in 2022, but both metrics have improved significantly over the past 18 months.

Source: YCharts.

For 2024, the company expects adjusted gross margin to increase by 75 to 125 basis points and adjusted operating margin to increase by one to three percentage points. The company also expects adjusted earnings per share to increase by 1% to 3% to $3.01 to $3.07 per share. Analysts expect reported earnings per share to grow at a compound annual growth rate of 13% from 2023 to 2026.

4. Kraft Heinz has a low valuation and a high dividend yield

At $35, Kraft Heinz stock is trading at just 12 times this year’s average earnings. In comparison, General Mills And Mondelez They trade at 16 and 21 times forward earnings respectively. Kellanovawhich recently agreed to be acquired by Mars, trades at 22 times forward earnings. This low valuation and the high forward dividend yield of 4.5% should limit Kraft Heinz’s downside potential.

5. Warren Buffett still owns this stock

And last but not least, Warren Buffett’s Berkshire-Hathaway — which helped arrange Kraft’s merger with Heinz — continues to hold 26.9% of the company’s outstanding shares. That $11.5 billion stake represents 3.7% of Berkshire’s portfolio and was neither cut nor liquidated in the recent sales of several high-profile stocks.

Buffett’s decision to stick with Kraft Heinz suggests that the company is not on the brink of collapse. It certainly won’t take off anytime soon, but it should be a good place to park your money and collect some decent dividends until the macroeconomic headwinds subside. So if you’re looking for a good blue-chip stock to buy as a safe haven right now, Kraft Heinz checks many of the right boxes.