Investors waiting for the share price of Kraft Heinz (NASDAQ: KHC) to bounce back have been disappointed for several years now. Indeed, it's been so long since this stock's even hinted at a rebound from 2017's and 2018's tumble that many investors aren't even watching anymore. They've simply moved on.

But there's a reason Warren Buffett's kept a sizable Kraft Heinz stake in Berkshire Hathway's portfolio since melding the two food companies into one back in 2015. That is, he still sees hope. The dividend Berkshire's collecting in the meantime isn't too shabby either.

The thing is, this stock's long-awaited recovery could finally be on the horizon.

A merger that underperformed on multiple levels

If you're not familiar with the saga, here's the shortened version of the story.

Back in 2015, Berkshire already held a big piece of condiment titan Heinz. It was a time, however, when mergers of similar companies were almost always seen as bullish, value-adding events. So, working with private equity outfit 3G Capital, Buffett helped orchestrate Heinz's acquisition of Kraft in anticipation of synergies and cost savings. And for a short while following the union, Kraft Heinz stock's rally suggested investors agreed.

Shareholders were finally forced to face a tough reality by 2017 though. That is, this merger wasn't working anywhere near as well as expected. Buffett finally conceded in 2019 that he "was wrong in a couple of ways on Kraft Heinz," adding that he "overpaid for Kraft." The admission was of little comfort to investors, however, who watched the stock lose more than 70% of its value from 2017's high to 2019's low.

Things haven't gotten more encouraging in the meantime either. Namely, Kraft Heinz shares haven't budged since then, largely driving last year's replacement of then-CEO Bernardo Hees with more promising Carlos Abrams-Rivera. Even with new leadership in place though, 3G Capital still recently abandoned its Kraft Heinz position, locking in the big loss on its investment.

But Buffett's still a believer, as Berkshire is the food giant's single biggest shareholder. You might want to take the subtle hint being dropped by his stubbornness with this particular ticker.

Meet the new and improved Kraft Heinz (finally!)

There's still above-average risk here if for no other reason than Kraft Heinz is in the midst of a massive, self-directed overhaul. The success and timing of such efforts are difficult to predict.

But real glimmers of hope are starting to emerge.

One of these glimmers is the sort of cost savings that was initially expected when Kraft and Heinz first became one. The company says it's on pace to find $2.5 billion worth of annual operational savings by 2027, largely driven by investments in AI tools and supply chain enhancements that simply weren't available until now.

For perspective, Kraft Heinz spends on the order of $22 billion per year on ingredients, management, and operations to drive roughly $26.5 billion in sales.

It's not just greater efficiency now working in shareholders' favor, however. The company's also giving more thought to meaningful innovation. For instance, Kraft Heinz now offers a microwavable grilled cheese sandwich that looks, tastes, and feels just like it was cooked in a pan. Kraft Heinz is finally and fully recognizing the value of branding partnerships as well. Examples include snack foods that offer Taco Bell's flavors at home and ketchup and mustard bottles (loosely) decorated to look like Marvel's superheroes Wolverine and Deadpool.

All told, the food outfit believes creative innovation alone will tack on an extra $2 billion in annual revenue.

Perhaps the most meaningful evolution underway for Kraft Heinz, however, is also the one that's the most difficult to see. That's some serious strategic thinking about how to best approach all of its different types of businesses. As an example, Kraft Heinz is now specifically addressing the way restaurants and cafeterias procure and serve food with options like improved self-service dispensers or packaging that makes it easier to prepare foods in bulk. This degree of detail may seem like overkill on the surface. Given how competitive the food business is, however, paying attention to the little things is often what ends up making a big difference.

Given all of this, despite the wobbly start to the year analysts still foresee solid top-line growth for this year and next, paired with even stronger earnings growth.

A bullish storm is brewing

Analysts see progress being made, so why don't most investors? More to the point, why is the stock still stuck in neutral? For a couple of partially related reasons.

The first of these reasons is simply that the company's current quarterly dividend of $0.40 per share hasn't been raised since being lowered in 2019. It's still being paid like clockwork, for the record. So, kudos. In an environment where reliable dividend growth is highly valued though, this is a stumbling block for most prospective shareholders even though its forward-looking dividend yield of 4.9% is well above the market's current average.

And the other reason Kraft Heinz's shares remain stagnant? They've now got something of a reputation for being an underperformer. It's going to take decisive bullishness to get it rolling higher again, but nobody -- and understandably so -- wants to be the first to take that bold, risky move of buying it.

Except, it's increasingly tougher to ignore the fact that the turnaround effort being led by Abrams-Rivera is working. It also wouldn't be out of line to at least entertain the notion that a dividend increase is in the cards sooner or later. The stock just needs a good nudge to start fully reflecting these prospects.

Investors might want to consider grabbing hold now so you're not forced to chase it if and when the ball finally gets rolling.

Should you invest $1,000 in Kraft Heinz right now?

Before you buy stock in Kraft Heinz, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Kraft Heinz wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $688,005!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of July 22, 2024

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.

1 Warren Buffett Stock That Could Go Parabolic in 2024 and Beyond was originally published by The Motley Fool