Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Kraft Heinz Co. (NASDAQ:KHC)

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Dividend Discount Model (DDM)

Intermediate level

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.


Intrinsic Stock Value (Valuation Summary)

Kraft Heinz Co., dividends per share (DPS) forecast

US$

Microsoft Excel LibreOffice Calc
Year Value DPSt or Terminal value (TVt) Calculation Present value at
0 DPS01
1 DPS1 = × (1 + )
2 DPS2 = × (1 + )
3 DPS3 = × (1 + )
4 DPS4 = × (1 + )
5 DPS5 = × (1 + )
5 Terminal value (TV5) = × (1 + ) ÷ ()
Intrinsic value of Kraft Heinz Co.’s common stock (per share)
Current share price

Based on: 10-K (filing date: 2020-02-14).

1 DPS0 = Sum of the last year dividends per share of Kraft Heinz Co.’s common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk of Kraft Heinz Co.’s common stock βKHC
 
Required rate of return on Kraft Heinz Co.’s common stock3 rKHC

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rKHC = RF + βKHC [E(RM) – RF]
= + []
=


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Kraft Heinz Co., PRAT model

Microsoft Excel LibreOffice Calc
Average Dec 28, 2019 Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Dividends declared, common stock
Dividends declared, Series A Preferred Stock
Net income (loss) attributable to Kraft Heinz
Net sales
Total assets
Shareholders’ equity
Financial Ratios
Retention rate1
Profit margin2
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin
Asset turnover
Financial leverage
 
Dividend growth rate (g)5

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

2019 Calculations

1 Retention rate = (Net income (loss) attributable to Kraft Heinz – Dividends declared, common stock – Dividends declared, Series A Preferred Stock) ÷ (Net income (loss) attributable to Kraft Heinz – Dividends declared, Series A Preferred Stock)
= () ÷ () =

2 Profit margin = 100 × (Net income (loss) attributable to Kraft Heinz – Dividends declared, Series A Preferred Stock) ÷ Net sales
= 100 × () ÷ =

3 Asset turnover = Net sales ÷ Total assets
= ÷ =

4 Financial leverage = Total assets ÷ Shareholders’ equity
= ÷ =

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × × =


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ( × ) ÷ ( + ) =

where:
P0 = current price of share of Kraft Heinz Co.’s common stock
D0 = the last year dividends per share of Kraft Heinz Co.’s common stock
r = required rate of return on Kraft Heinz Co.’s common stock


Dividend growth rate (g) forecast

Kraft Heinz Co., H-model

Microsoft Excel LibreOffice Calc
Year Value gt
1 g1
2 g2
3 g3
4 g4
5 and thereafter g5

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= + () × (2 – 1) ÷ (5 – 1) =

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= + () × (3 – 1) ÷ (5 – 1) =

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= + () × (4 – 1) ÷ (5 – 1) =