Conagra & The Allure of a Falling Snack

My aunt Carol, a woman whose investment strategy peaks with clipping coupons for canned peaches, recently cornered me at Thanksgiving. She’d heard about Conagra Brands—the people behind Slim Jims, Healthy Choice, and Duncan Hines—and was convinced it was “a sure thing.” A 35% drop in stock price, she reasoned, meant a sale. It’s always a sale with Carol. I tried to explain the concept of “value traps” – stocks that look cheap but are cheap for a reason – but she was already picturing herself swimming in pudding. It got me thinking, though. This Conagra situation…it’s not entirely crazy. Just…fraught.

Conagra, you see, isn’t exactly setting the world on fire. They make perfectly acceptable food, the kind you eat when you’re exhausted and have given up on pretending to be a grown-up. But they don’t lead in anything. PepsiCo, for example, doesn’t dominate cola, and yet, they’re still churning out profits. It’s a mystery to me. Maybe it’s the sheer volume. Or maybe it’s a conspiracy involving high fructose corn syrup and the manipulation of our collective sweet tooth. Anyway, Conagra’s latest earnings report was…less than inspiring. A 6.8% sales decline, organic sales down 3%. And then, the kicker: a $940 million impairment charge. It’s like admitting your brands aren’t worth what you thought. It’s the financial equivalent of realizing your childhood baseball cards are just…cards.

That impairment charge, by the way, isn’t a cash outflow. It’s an accounting thing, a reduction in “shareholders’ equity.” Which basically means we – the shareholders – absorb the loss. It’s a subtle form of theft, really. They don’t take money directly from your account, but they quietly diminish its value. It’s a bit like my neighbor, Mr. Henderson, “borrowing” my hedge trimmers and returning them with a slightly bent blade. Technically, they still work. But you know something’s off.

So, Conagra isn’t exactly a rocket ship. And the dividend? Well, it’s currently yielding 8.2%, which sounds fantastic. But it’s the kind of yield that makes you reach for a magnifying glass. It’s the financial equivalent of finding a twenty-dollar bill in an old coat pocket – exciting, but also slightly unsettling. They were paying out more than they were earning, which is fine for a little while. But the payout ratio has been hovering dangerously close to 100% for a while now. My aunt Carol would probably see that as “aggressive growth.” I see it as a ticking time bomb.

They’ve cut the dividend before, when things got tight. And the fact that they haven’t increased it in years is a pretty big red flag. It’s like a friend who keeps promising to pay you back, but never quite gets around to it. You know, deep down, you’re not getting that money back. A dividend cut is likely already priced into the stock, but that doesn’t make it any less painful. It’s the difference between expecting a mild headache and getting a full-blown migraine.

Look, I’m not saying Conagra is going bankrupt. They’ll probably muddle through. But if you’re relying on that dividend to pay for, say, your cat’s organic salmon habit, you might want to reconsider. There are better options out there. PepsiCo, for example, is still growing, albeit slowly. And their dividend yield is a more reasonable 3.9%. They’ve also increased their dividend for over 50 consecutive years. It’s the kind of consistency I appreciate. It’s the difference between a reliable plumber and a guy who shows up whenever he feels like it.

Conagra might appeal to aggressive investors looking for a turnaround story. But for the rest of us, it’s probably best to look elsewhere. There are plenty of other snacks to invest in. And, frankly, I’d rather put my money into something that doesn’t remind me of my aunt Carol’s questionable financial decisions.

2026-01-21 02:42

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