Investors chasing dividends in this uncertain market might want to consider Conagra Brands (CAG), which offers the highest dividend yield among stocks listed in the benchmark S&P 500 index.
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Currently Conagra pays a quarterly dividend of $0.35 per share, giving its stock a yield of 9.2%, the highest in the S&P 500. The company behind well-known brands such as Orville Redenbacher popcorn and Swiss Miss hot chocolate has paid a dividend consistently for the past 50 years.
Conagra has raised its distribution to shareholders over the past five years, with an average annual increase of 10.5% over that period of time. While the current dividend yield is impressive and attractive, it comes with some risks.
Is the Dividend Sustainable?
Part of the reason CAG stock has such a high dividend yield is that the share price has cratered. Over the last five years, Conagra’s stock has declined 60%, including a 41% decline in the past 12 months. Like many packaged-food companies, Conagra faces rising input costs and shifting consumer tastes.
Additionally, analysts note that Conagra distributes about 80% of its earnings or profits as dividends, leaving little room for error. If the stock continues to decline, or if Conagra’s sales and profits deteriorate further, it could lead the company to cut its dividend, which would send the share price even lower.
Is CAG Stock a Buy?
Conagra stock has a consensus Hold rating among eight Wall Street analysts. That rating is based on one Buy, five Hold, and two Sell recommendations issued in the last three months. The average CAG price target of $17.88 implies 17% upside from current levels.
