The identify Conagra Manufacturers (NYSE: CAG) might not instantly be recognizable to you. However I’d hazard a guess that you simply at the moment have considered one of its merchandise in your fridge or pantry proper now.
The corporate manufactures and sells grocery retailer staples corresponding to Hunt’s tomatoes, Swiss Miss sizzling cocoa and pudding, Pam cooking spray, and plenty of extra.
Sadly for Conagra, the previous couple of years have been a wrestle, with its inventory value retreating 54% since its peak in January 2023. A number of elements, corresponding to tightening margins, inflation, and unfavourable M&A (mergers and acquisitions) outcomes, have led to a gradual however regular lower in gross sales.
The inventory’s present dividend yield sits at 7.4%. It has prevented any dividend cuts within the final 10 years – except for when it spun off Lamb Weston Holdings (NYSE: LW) to separate its potato enterprise from the remainder of the corporate.
With all the current dangerous information, let’s see whether or not Conagra’s dividend is prone to being minimize or there may be nonetheless hope for a rebound.
First, we have to spotlight an enormous transfer by the corporate: In June of this yr, Conagra offered off the model Chef Boyardee for $600 million. (Whereas that’s very useful in padding its free money move, I’m tempted to knock some extent off Conagra’s dividend security ranking as a result of it canned up my childhood nostalgia and offered it off.)
Solely time will inform how a lot it will have an effect on the corporate’s backside line, as estimates in 2024 confirmed that Chef Boyardee introduced in $450 million in gross sales.
Now let’s isolate Conagra’s skill to pay its dividend by taking a look at its free money move. Regardless of the contraction of the inventory value, 2024 was surprisingly an excellent yr for the corporate, because it greater than doubled its free money move from $633 million to greater than $1.6 billion.
The issue is that ever since then, there’s been a gradual decline. Free money move sunk nearly 20% to $1.3 billion in fiscal 2025, which resulted in Might. What’s even worse is that even with the corporate promoting a number of of its manufacturers this yr, ahead estimates point out a 42% discount in 2026 all the way in which right down to $760.2 million.
Lastly, Conagra has introduced no plans to chop its dividend, which goes to throw its dividend payout ratio out of whack. Its payout ratio for 2025 sat at 51.4%, however because of the large estimated lower in free money move for 2026, that ratio is estimated to leap to 88.0% – above our threshold of 75%.
As with every inventory, there’s hope that Conagra will proper the ship and switch this round. However for now, it appears to be like just like the dividend is at risk of being minimize within the close to future.
Dividend Security Score: D
What inventory’s dividend security would you want us to research subsequent? Depart the ticker within the feedback part.
It’s also possible to have a look to see whether or not we’ve written about your favourite inventory just lately. Simply click on on the phrase “Search” on the prime proper a part of the Rich Retirement homepage, sort within the firm identify, and hit “Enter.”
Additionally, take into account that Security Internet can analyze solely particular person shares, not exchange-traded funds, mutual funds, or closed-end funds.
