{"id":1269,"date":"2023-04-28T03:45:26","date_gmt":"2023-04-28T07:45:26","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/2-stocks-to-sell-2-soaring-dividends-to-buy\/"},"modified":"2023-04-28T03:45:27","modified_gmt":"2023-04-28T07:45:27","slug":"2-stocks-to-sell-2-soaring-dividends-to-buy","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=1269","title":{"rendered":"2 Stocks To Sell, 2 Soaring Dividends To Buy"},"content":{"rendered":"
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I\u2019m not going to lie to you: this market is headed for a fall. And if you\u2019re caught holding the wrong<\/em> dividend payers, you could be in for some serious losses indeed.<\/p>\n

How serious? Well, the worst of the four stocks we\u2019re going to delve into below\u2014Cracker Barrel Old Country Store (CBRL)\u2014<\/strong>plunged 26% last year, much<\/em> further than the S&P 500. If you hold this one, or the other dangerous dividend we\u2019ll discuss below, it\u2019s time to cut your losses and get out now.<\/p>\n

But we\u2019re not only<\/em> going to sell today\u2014we\u2019re going on offense, too. Because despite this nosebleed market, there are still plenty of surging dividends out there tied straight into megatrends with decades<\/em> left to run. I\u2019ll name two particularly smart buys below, including one with a \u201cshoe size\u201d P\/E and a boatload of cash heading out the door as dividends and buybacks.<\/p>\n

Here, from worst to first, are four stocks to buy and sell as we pivot toward the choppy market headed our way soon.<\/p>\n

Worst: Cracker Barrel\u2019s Costs Are Soaring<\/h2>\n

If you\u2019ve been to your local watering hole lately, you\u2019ve no doubt noticed that it always seems to be packed.<\/p>\n

It\u2019s true\u2014many folks are still catching up after years of lockdowns. But that\u2019s cold comfort to restaurants, including Cracker Barrel Old Country Store. The chain is seeing higher sales, with revenue up 8% in the latest quarter. But soaring costs are still singeing its profits.<\/p>\n

<\/fbs-ad><\/p>\n

That was behind a 14% EPS slide, and the hits kept coming: wages jumped 6%; other store operating expenses soared 9%; general administrative expenses spiked 5%; and cost of goods sold was up 15%!<\/p>\n

Where does that leave the dividend? In a dangerous spot.<\/p>\n

CBRL yields 4.8% today, but that\u2019s entirely the result of the stock\u2019s plunge. Worse, CBRL is paying 109% of its last 12 months of earnings and 146% of free cash flow as dividends. That obviously can\u2019t last.<\/p>\n

Second-Worst: Kraft Heinz Is Cheap for a Reason<\/h2>\n

Kraft Heinz Co. (KHC),<\/strong> with its raft of packaged-food brands (Oscar Meyer, Velveeta and Jell-O among them), may look like a bargain at 14.5-times forward earnings. And that is<\/em> cheap compared to competitors like Mondelez International
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\n MDLZ
\n <\/fbs-ticker> (MDLZ),<\/strong> at 22.4, and Coca-Cola
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\n KO
\n <\/fbs-ticker> Co. (KO)<\/strong> at 24.5.<\/p>\n

But this one is cheap for a reason.<\/p>\n

Think back to the lockdowns for a second. Back then, inflation was low, consumers favored foods that kept for a long time and no one<\/em> was eating out. An ideal setup for KHC, in other words.<\/p>\n

Today, all of those trends have flipped, and high inflation is weighing on KHC\u2019s free cash flow, which fell 65% in the fourth quarter. That put the dividend (which was already cut by 36% in 2018 and has gone nowhere since) under pressure, as it now absorbs 126% of KHC\u2019s last 12 months of free cash flow.<\/p>\n

I\u2019m not saying things can\u2019t improve (a recession would bring KHC\u2019s foods back into favor, for example). It\u2019s just that waiting for KHC\u2019s dividend to rise again isn\u2019t worth the 4.1% yield\u2014especially when there are better food stocks out there, like Pick No. 1 below.<\/p>\n

Second-Best: Johnson & Johnson
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\n JNJ
\n <\/fbs-ticker> Has Hidden Value<\/strong><\/h2>\n

Johnson & Johnson (JNJ), <\/strong>with its 3% yield, doesn\u2019t get many folks\u2019 hearts racing\u2014and that\u2019s A-OK with us. Because while the first-level crowd rolls the dice on the likes of Tesla
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\n TSLA
\n <\/fbs-ticker> (TSLA),<\/strong> JNJ quietly does two things that come as close to guaranteeing upside as you can get:<\/p>\n