A future spin-off could unlock tremendous value for investors in high-yield Kraft Heinz.
Kimberly-Clark’s planned merger with Kenvue, the Johnson & Johnson spinoff, may bode well for future dividend growth and price appreciation.
Declining enthusiasm for Philip Morris works in your favor as the tobacco company’s smokeless pivot suggests sustainability of dividend growth.
10 Stocks We Like More Than Kraft Heinz ›
Under the right circumstances, buying the dip can turn out to be a profitable move. If a stock has become oversold due to investor overreaction, buying on weakness could lead to an opportunity to sell strongly in the future.
Add in the steady cash income from dividend stocks and you can increase your potential total returns even more. With that in mind, let’s look at three blue chip dividend stocks, each with a recent pullback, that could have the potential to produce strong earnings in the coming years and also generate steadily growing dividend income.
The actions I’m talking about are Kraft Heinz(NASDAQ: KHC), Kimberly-Clark(NASDAQ: KMB)and Philip Morris International(NYSE:PM).
Image source: Getty Images.
Kraft Heinz has been a value and yield trap for the past decade. Since the end of 2025, the packaged food leader’s stock has fallen nearly 65%. That drop far outstripped gains from the stock’s quarterly dividend, which at one point was 62.5 cents a share, but was cut to 40 cents in 2019 and has remained at that level ever since.
However, following the stock’s steady decline, the stock has moved to a price that gives it a high forward dividend yield of 6.5%. In the years ahead, the stock may have the potential to deliver significantly better price performance.
It all has to do with a future event: the planned spinoff of Kraft Heinz stock into two separate entities. Management intends to complete this transaction in the second half of 2026.
Kraft Heinz currently trades for less than 10 times forward earnings. A big reason: these negative perceptions about the company’s future growth.
However, if it breaks up, the company could experience a scenario similar to the former Kellogg’s. Since that split, each of the two spinoffs– Kellanova and the former WK Kellogg — has been acquired or is in the process of being acquired at much higher valuations.
Kimberly-Clark — best known for products like Huggies disposable diapers, Kleenex and Scott wipes — is about to add a new set of brands to its portfolio. The company is in the process of being acquired Kenvue.
The maker of Tylenol, Neutrogena and Listerine split from Johnson & Johnson in a divestiture that was completed last year. At first, it may seem strange to combine a company that makes diapers and wipes with a company that makes pain relievers and mouthwash, but this headline-making merger could bode well for investors.
Management expects this transaction to create cost synergies totaling $2.1 billion, making the business attractive to shareholders over the long term. In turn, this suggests the potential for Dividend King Kimberly-Clark to continue raising its dividend quarterly, as it has for each of the past 52 years. It currently has a forward dividend yield of 4.9%.
Philip Morris, which was spun off Altria Group In 2008, it was initially in the business of selling cigarettes outside the US. In recent years, however, the company, known as PMI for short, has made a major pivot toward becoming a supplier of smokeless tobacco and nicotine products.
First, PMI launched its Iqos heated tobacco device. Then, with the acquisition of Swedish Match, it became the owner of Zyn, which has become the leading nicotine pouch in the US PMI, with a price-to-earnings (P/E) ratio of about 19, trading at a huge premium to its former corporate parent, which trades for about 12 times forward earnings.
However, this valuation premium is justified and likely sustainable given PMI’s more secure growth outlook. As smokers switch to alternatives to cigarettes, the company will benefit from organic growth. Therefore, PMI may have a stronger potential to increase its 3.7% dividend.
Meanwhile, Altria, which is still experiencing mixed success with its smoke-free efforts, may struggle to sustain, much less grow, its current yield of 7.1%.
Before buying Kraft Heinz stock, consider the following:
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Thomas Niel has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Kenvue. The Motley Fool recommends Kraft Heinz and Philip Morris International. The Motley Fool has a disclosure policy.
3 Dividend Stocks to Double Up on Right Now was originally published by The Motley Fool
