Conagra's (NYSE: CAG) dividend cut makes it the best buy in the grocery category because it accelerates the timeline for an ongoing turnaround. The dividend cut is expected to free up $335 million in annual cash flow, with the money going toward accelerated debt reduction, supply chain improvements, and brand investments to reinvigorate growth, widen margins, and improve cash flow.
Today’s dividend pain is tomorrow's investment gain, and the market response reveals the pain hurts so good. What the market sees is a consumer staple with a healthy brand portfolio trading at 8x current-year earnings, paying a reliable dividend yielding about 4.8% (after the cut), with a turnaround in progress.
