Conagra at Rock Bottom: 7% Yield & Turnaround Poised

Key Points

• Conagra Brands' weak 2025 sets the stage for a bottom and reversal in F2026.
• The dividend is reliably safe and yields about 7% in early Q3.
• Buy-and-hold investors with a long-term time horizon can buy shares now, before the stock price rebound begins.

Conagra NYSE: CAG shares are at rock bottom in early Q3 2025, offering an ideal entry for buy-and-hold investors. Although headwinds persist for the entire consumer staples sector, the company’s business contraction has come to an end, and repositioning efforts have positioned it to return to growth in FY2026. It will take time for the turnaround to gain traction; until then, the 7% dividend is reliably safe, offering income investors with a long-term time horizon some incentive to buy. 

The price action is bearish following the release, shaving 5% off the share price and setting a new long-term low. The market may continue to sell off, but oversold stochastic and divergence in the MACD suggest this market is overextending and setting up for a rebound. 

Conagra’s Dividend: How Risky Is the 7% Yield?

The dividend comes with some risk in 2025, and a cut can’t be entirely ruled out, but it is mitigated by the cash flow, balance sheet health, and outlook for organic business improvements. The payout ratio for 2026 is forecasted at 80% relative to the 2025 payout, which is high for any company but more sustainable relative to the free cash flow outlook. 

The free cash flow payout ratio was closer to 50% in 2025 and is not expected to increase significantly in 2026. The bigger risk is that the pace of distribution growth will slow or cease entirely. 

The balance sheet is rock solid, providing some flexibility for management. In 2025, operating activities enabled the company to reduce its debt and improve its leverage while investing in the business and paying dividends. Highlights at the end of FQ4 2025 include a reduced cash position offset by increased inventory, steady assets, reduced debt and total liabilities, and improved equity, which are tailwinds for the market. 

Conagra Repositions in the Face of Consumer Headwinds

Conagra did not have a great quarter in Q4 F2025, with revenue declining by 4.3% reported and 3.5% organically. However, divestitures, consumption trends, and FX headwinds impacted the results, which don’t reflect the sequential improvements in the core business.

The organic decline is due to a 1% reduction in price realization, compounded by a 2.5% decline in volume, which is not expected to linger much longer. The International segment led all reported declines. It declined by 13% due to M&A activity and foreign exchange headwinds, growing organically by 0.8%. 

The guidance is why this stock market is at or near its bottom. The reported revenue contraction expected for F2026 will be offset by flat to slightly higher organic growth and earnings sufficient to sustain balance sheet health and dividend distributions. This sets the market up to move sideways as it anticipates future business improvements, which could serve as catalysts for higher share prices.

Until then, the dividend will keep many investors, including institutions, interested. Institutional activity is a critical factor; the group owns more than 80% of the stock, provides a solid support base, and has been buying on balance all year. 

Analysts Prime CAG Market for Significant Rebound

The analysts' activity in 2025 is mixed, featuring numerous price target reductions and a few downgrades, all of which negatively impact the price action. However, the broad trends are bullish, including increased coverage, a firm Moderate Buy rating, and expectation for significant upside.

The post-release stock price decline put CAG stock below the analysts' low-end range, setting it up to rebound by a low-single to high-double-digit amount, potentially 30% at the early July consensus. Assuming the company can gain traction in F2026, analysts' sentiment trends will strengthen and provide lift for the market.