Why WK Kellogg Stock Soared Higher This Week

Key Points

• WK Kellogg was added to multiple Russell Value indexes.

• This led to an increase in the company's share price as the indexes picked up shares.

• Kellogg may be an intriguing value stock, especially with its 3.7% dividend yield.

Shares of leading cereal maker W.K. Kellogg (NYSE: KLG) were up 10% this week as of market close Thursday, according to data provided by S&P Global Market Intelligence.

On Monday, the Frosted Flakes maker was added to the Russell 2000 Value, 2500 Value, and 3000 Value indexes, as well as the Russell Small Cap Completeness Value Index.

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Kellogg's addition means that these indexes acquired a significant portion of the company's shares this week, contributing to the price run-up.

More importantly, however, Kellogg's inclusion lends credence to the notion that it may be an intriguing value stock, as I wrote about last year.

WK Kellogg: Value investment or value trap?

WK Kellogg spun off from Kellanova in 2023 and now exists as a pure-play cereal-selling enterprise, powered by its Kashi, Froot Loops, Special K, Raisin Bran, and Frosted Mini-Wheats brands.

However, spending over 100 years together with Kellanova, Kellogg looks more like a turnaround stock as it battles to separate itself from its parent company.

Image source: Getty Images.

While this is a lengthy process, Kellogg is making solid progress, including:

• Implementation of its own enterprise resource planning system last quarter
• Being on track to separate its distribution by mid-2025
• Stabilizing margins as it modernizes its supply chain

Now, with a light at the end of the tunnel regarding these separation costs, Kellogg can focus on actually marketing its cereal.

Emphasizing cereals with simplified ingredients providing protein and fiber, the company aims to cater to consumers who prioritize healthier cereal options, whether for breakfast or as a snack on the go.

Currently paying a healthy dividend yield of 3.7%, Kellogg could be a steady passive income investment with upside potential if management succeeds in its ambitions to streamline operations following the separation.

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool recommends WK Kellogg. The Motley Fool has a disclosure policy.