2 High-Yield Values for Dividend Growth and Capital Gains

Key Points

• Consumer staples like Lamb Weston and Conagra Brands present deep values and high yields in Q2 2025.
• The guidance is tepid relative to analysts' forecasts but sufficient to sustain robust capital return programs.
• Analysts reset price targets early in the year, but these markets have overcorrected and are ready to rebound.

Lamb Weston NYSE: LW and Conagra Brands NYSE: CAG are trading at value levels and offering historically high yields for investors in 2025. While Lamb Weston trades at a premium to Conagra, both are at the low ends of their historical ranges and well below broad market averages, and there are reasons. Both are quality consumer staples brands, but Lamb Weston’s potato-centric business is more stable and growing in 2025, while Conagra struggles with headwinds. 

Conagra’s headwinds include a consumer shift to lower-price brands and margin contraction in FQ3, which are expected to ease in Q4 and dissipate in F2026. Investors can get into these stocks now, while they are down, and reap the market-beating 2.7% and 5.3% dividend yields until their share prices revert to the high ends of their respective valuation ranges. 

Lamb Weston Is the Better Choice on a Performance Basis 

Looking at the two from a performance standpoint, Lamb Weston is the better choice in early 2025 despite the higher valuation and lower yield. The company produced growth versus a contraction and outperformed on the top and bottom lines. Its business was supported by positive volume trends offset by lower price/mix, with North American and International business growth.

On the other hand, Conagra underperformed due to weakness in organic sales and pricing; however, it reaffirmed its FY guidance and expects a solid Q4. 

Each delivered favorable guidance aligning with the analysts’ consensus reported by MarketBeat. Both are forecasting contractions in full-year revenue.

The critical detail is that both expect margin strength and cash flow improvement due to internal efficiencies and positioning efforts sufficient to sustain mutually robust capital returns. Both are expected to revert to revenue growth in 2026 and maintain healthy CAGRs through 2030. 

Capital Returns: Consumer Staples Are About Capital Returns

Growth is important to a consumer staple stock's price direction but is not the only factor involved. These companies tend to be large and grow in slow, cyclical spurts; the critical details are cash flow, capital returns over time, and sustainability. In this case, capital returns include dividends and repurchases. 

Comparatively speaking, Conagra’s dividend is more significant, yielding 5.3% in early April 2025, while Lamb Weston has a better buyback. Buybacks reduced the count by 2% in the first nine months of the year and are expected to continue strongly in Q4 and F2026.

Conagra’s buybacks are much smaller. However, they are sufficient to reduce the share count annually and increase shareholder leverage.

Regarding dividend safety, Conagra pays about 55% of its earnings, and Lamb Weston pays 45%. 

Analysts and Institutions Indicate Deep Value in Consumer Staples Stocks

The analysts' trends in late 2024 and early 2025 include some price target reductions and downgrades. Still, the markets for CAG and LW stock overcorrected, opening up profound value opportunities highlighted by institutional activity. LW trades well below the analysts’ lowest price target and CAG at the analysts’ floor, indicating a double-digit upside at the consensus, and the institutions are buying.

Institutional activity in these stocks reverted to buying on balance from selling in Q3 and then ramped in Q4 and Q1 2025. The Q1 2025 activity set a multi-year high, indicating a solid support base and a low likelihood of significantly lower prices. 

Technically, the stocks are trading near long-term lows and at value levels. Recent activity suggests they’ve hit bottom and are setting up to rebound. The question is how high the stock prices may get, and it could be a significant gain in 2025. Macroeconomic headwinds are cutting into the growth outlook for stocks across sectors and industries, making low-beta, capital-returning stocks like these very attractive.