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By Josh Peters, CFA | 09-15-2009 03:54 AM

Will Kraft Dividend Investors Go Hungry?

The burdens of a possible Cadbury acquisition and Kraft's recent decision not to raise its dividend (a first since its spin-off) should give dividend investors pause.

Josh Peters: Last week's offer by Kraft Foods to acquire Cadbury of England for $16.7 billion is still making news around the globe. However, there was one other piece of news from Kraft last week that, for an investor like me, is equally as important: For the first time since the company came public in 2001, it decided not to raise its dividend in the third quarter.

Hi, this is Josh Peters, editor of Morningstar DividendInvestor.

Kraft is the kind of stock that a lot of dividend investors--people looking for retirement income or to reinvest dividends for future retirement income--look to in order to provide them with a good yield. Right now, Kraft's stock yields over four percent.

Now, Cadbury, with candy and chocolate businesses around the globe, could make a very good acquisition for some larger food company. And as the world's second-largest food company, Kraft certainly qualifies. Kraft also doesn't have much exposure right now in the confectionery industry anywhere in the world, so this could be a good strategic add-on to their portfolio of brands.

However, there's a little bit more to the story, and it has me a little bit concerned, specifically about Kraft's dividend and the effect this acquisition could have on Kraft's shareholders.

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