Kraft Foods Group New In Dividend Yield Passive Income Portfolio

Last Friday I put 40 Kraft Foods Group (KRFT) shares into the dividend yield passive income portfolio at a cost of $44.41 per share. The total amount was $1,778.

Kraft Foods is the major diversified food company within the United States. Roughly 20% of sales are generated outside the United States.

The shares are weighted at 1.7% of the total yield income portfolio and they will generate an annualized dividend income of 76 bucks per year. The total income is now around $700 per year. My investment costs were $18,000 and the yield on cost is 3.68%.

The portfolio was funded with $100,000 virtual, 3 months before and has now 13 stock holdings. I tried to put every Friday one stock into the portfolio.

What I try to do is to invest money into mid-yielding stocks, stocks with a dividend yield of around 2-4%. It is hard to find stocks that pay a yield over 3% and have a high-quality and proven business model.

Because the portfolio is 1.45% down since I funded it, the current portfolio yield is 3.72%. That is a bad performance you would say. You are right for the time being. But the strategy is to buy slowly and over a long period. Returns are realized over a long investment horizon and not over months and hours.

By the end of 2013, I'd like to increase the amount of stock holdings to 52 - 70 in total. This should be realistic. All I need to do is to buy one stock each week. If I should realize this, the full dividend income should be around $3,500 per year.

So why did I buy Kraft Foods shares for the dividend yield passive income portfolio?

There are several reasons: Kraft Foods manufactures and markets food and beverage products, including convenient meals, refreshment beverages and coffee, cheese and other grocery products, in the United States and Canada, under a stable of iconic brands. The Company's product categories span breakfast, lunch and dinner meal occasions, both at home and in foodservice locations. It sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, drug stores, gasoline stations, value stores and other retail food outlets in the United States and Canada.

The first reason is that the dividend yield is around 4.5%. That's a pretty high figure for a food company with great value and strong brands. In addition, the new Kraft Foods Group is one of the biggest food players in North America. The company is nearly dept free and has enough potential to be a consolidation leader.

Kraft Foods Group generates roughly 2.6 billion cash from operating activities at 400 million capital expenditures. Calculated on this amounts I expect that the company will become around 4 billion in debt in order to finance further growth, repurchase own shares or even to increase dividends.

If we take a look at competitors like Heinz (HNZ), General Mills (GIS) or Campbell Soup (CPB) we would see that Kraft's valuation is not cheap but also not expensive. The reason why KRFT shares are cheaper than the competitors is their low amount of dept.

The current P/E ratio from Kraft Foods is 13.53. Heinz has a P/E ratio of 17.94, General Mills P/E ratio is at 14.78 and Campbell Soup is traded at 14.65 times of earnings.

I've no idea how fast the company can grow in the near future. For the next five years, earnings per share are expected to grow by 6.3%. That's one of the top values from its peers.

Here are the current holdins in my Passive Income Portfolio: