With the S&P 500 (SPX) hitting new record highs and reaching elevated valuation levels, it may seem like bargains in the current market environment are few and far between—but they are out there. One great example of a stock trading at bargain levels is Conagra Brands (CAG), which trades for a dirt-cheap valuation and sports an attractive 5.0% dividend yield.
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I’m bullish on this consumer staples giant based on its inexpensive valuation, compelling dividend yield, and defensive business nature.
What Is Conagra Brands?
Conagra Brands was founded over a century ago, in 1919, and is based in Chicago. If you aren’t familiar with the name Conagra, you’re likely at least familiar with many of its brands, which are staples on grocery store shelves. These include Birdseye, Healthy Choice, Marie Callender’s, Duncan Hines, Hebrew National, Reddi Whip, Slim Jim, Vlasic, and more.
It may not sound like the most exciting business in the world, but these are well-established brands that will enjoy durable demand no matter our economic environment. In a challenging economy, many consumers may reduce discretionary expenses like eating out at a restaurant. But they’ll likely continue buying the groceries they need to cook for themselves and their families at home.
This dynamic makes Conagra a solid defensive component within investors’ portfolios.
Super Cheap Valuation
Conagra stock has lagged the market, with a 5.9% loss over the past year (versus a gain of over 30% for the S&P 500). Shares are trading just above their 52-week low.
The upshot of this underwhelming performance is that shares of Conagra are now super cheap. In fact, at just 10.9 times consensus May 2025 earnings estimates, they trade at less than half the broader market multiple as the S&P 500 now trades for over 25 times earnings.
With the major index trading at all-time highs and a historically steep valuation, inexpensive dividend stocks like Conagra can be appealing as a defensive play in the event of an economic downturn or a market correction. Plus, the undemanding multiple means there is plenty of room for upside left.
Appealing Dividend
In addition to being dirt cheap, Conagra is also a great dividend stock that should be considered for all income investors. Its attractive 5% dividend yield stands out against the broader market, with the S&P 500 yielding just 1.2%. Additionally, Conagra features a more attractive yield than 10-year treasuries, which currently yield 4.3%, with interest rates widely expected to come down in the future.
Plus, Conagra has a reliable history as a consistent dividend payer, having paid dividends for the past 35 years in a row. The company has also raised the level of this dividend payout for the past five years in a row. The company has grown its payout at a 10.5% compound annual growth rate (CAGR) over the past five years, representing a decent clip.
Mind the Upcoming Results
It’s worth noting that Conagra will report Q2 2025 earnings on December 19.
The last time Conagra reported earnings in early October, the stock fell by about 10% for the day as the company missed on earnings and revenue. Revenue also fell by 3.8% year-over-year and organic net sales fell by 3.5%.
However, despite the miss, management reaffirmed its full-year guidance for adjusted EPS of $2.60 to $2.65, which seems feasible, and much of the bad news seems to already be baked into the stock price (as discussed above, it looks very cheap based on earnings estimates). Plus, last quarter had some unexpected one-time challenges like a temporary shutdown of its Hebrew National plant which management says crimped sales during prime grilling season.
With shares already trading at depressed levels, I believe investors could benefit from initiating a starter position in the stock now ahead of earnings in the event it surpasses low expectations and surprises to the upside and then dollar-cost averaging into a larger position if the stock falls after reporting earnings next week.
Is CAG Stock a Buy, According to Analysts?
Turning to Wall Street, CAG earned a Hold consensus rating based on two Buys, eight Holds, and one Sell rating in the past three months. The average CAG stock price target of $31.20 implies a 10.64% upside potential from current levels.
A Compelling Combination of Value and Income
I’m bullish on Conagra stock due to its inexpensive valuation of under 11 times 2025 earnings estimates and its attractive dividend yield of 5.0%. This combination of low valuation and high yield makes Conagra a compelling option for value and dividend investors. Plus, sell-side analysts see a decent potential upside of 13.5% for shares over the next 12 months, so there are multiple ways investors can win here.
