The Buffett Era Is Over: Could This Ultra‑High‑Yield Stock Unravel?

A little more than a decade ago, Kraft and Heinz merged in a $46 billion deal backed by Warren Buffett's Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) and the Brazilian private equity firm 3G Capital. Since that deal, one of the largest food company mergers, Kraft Heinz (NASDAQ: KHC) has floundered.

The merger was designed to achieve cost savings. But ultimately, by reducing marketing and product development spending, the consumer staples conglomerate's brands grew stale compared to competitors'. On top of that, the jump in food prices over the past few years has led many people to drop well-known brands such as Kraft Heinz in favor of store brands.

In September, the company announced it would split into two businesses, one for its faster-growing products, such as Heinz condiments, Philadelphia cheese, and Kraft Mac & Cheese, and the other for slower-growth products, such as Lunchables and Maxwell House coffee. Then, in February, new CEO Steve Cahillane halted the breakup plans, announcing that the company would instead reinvest in marketing and product development to end the tailspin.

Here's one reason to buy the stock, and two not to -- and let's see how this all adds up for investors.

Image source: Getty Images.

It's a great dividend

The company's stock has dropped more than 26% over the past year. That fall, in turn, has raised the company's dividend yield to around 7.28% at its current share price. While that may seem like a value trap, the cash dividend payout ratio is just above 51%, so the dividend is still well-covered.

If you believe in the company's turnaround prospects, that 7.28% dividend will pay you handsomely for waiting for the new management team to reinvest $600 million into marketing and research and development to stabilize its brands.

The company is becoming less profitable

Kraft Heinz reported 2025 revenue of $24.9 billion, down 3.5% and the third consecutive year of declining sales. It has seen revenue fall, year over year, for nine consecutive quarters. It finished the year with an earnings per share (EPS) loss of $4.93, down 318%.

The company's established brands will have an uphill battle to overcome the momentum of lower-priced store brands. I went to the grocery store the other day, and a bottle of Heinz chili sauce was more than twice as much as the store brand.

The point of its $600 million effort is to find newer, high-margin products to interest consumers. However, I'm not sure if selling Capri Sun Hydrate, an electrolyte drink for children, while a move in the right direction, will be enough to turn the company's fortunes around. Competing with store brands means competing on price, further reducing the company's margins.

The Berkshire Hathaway hangover

Before Warren Buffett stepped down as the CEO of Berkshire Hathaway, he said he didn't like Kraft Heinz's potential split. He told CNBC: "It certainly didn't turn out to be a brilliant idea to put them together, but I don't think taking them apart will fix it." Berkshire Hathaway, as of the end of 2025, had 326.5 million shares of Kraft Heinz stock, a 25.7% stake in the company.

On Jan. 20, Kraft Heinz filed a prospectus with the Securities and Exchange Commission disclosing that Berkshire Hathaway "may offer to sell, from time to time, 325,442,152 shares." This filing effectively registers Berkshire's entire stake for a potential sell-off.

When a major, long-term shareholder such as Berkshire Hathaway exits a position, it can create an overhang on the stock price -- both because of the literal selling pressure of millions of shares, and because it signals a lack of confidence from one of the company's biggest backers.

All in all, the company has some issues to overcome if it's to regain the confidence of investors.

James Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.