* DD Research analyst David Driscoll digs into the tricky question of what Kraft Heinz (NASDAQ:KHC) might do with its lush dividend as the food company's debt to EBITDA ratio moves to an uncomfortable level.
* Driscoll notes that by the strict math of DD's financial projections, it looks like the dividend can be maintained at current levels. "However, this requires that our expectations for business reinvestment are reasonably accurate. If, for instance, management wants to reinvest at a faster rate to turn the business sooner, then EBITDA will likely come in lower than forecasted, which would likely require a dividend cut to give the company a bit of breathing room," he warns.
* The second alternative seen by Driscoll is if Kraft management decides to sell some assets and maintains the dividend.
* "In our opinion, the dividend is nice, but we put more weight on the underlying fundamentals when weighing the merits of Kraft as an investment," sums up Driscoll.
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