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A Diamond of the Dow for 2012

Every night this week, the first week of the year, Cramer is highlighting stocks that he thinks could outperform the Dow Jones industrial average. On Tuesday, he explained why he thinks AT&T is a “diamond of the Dow.” He turned his attention to Kraft Foods on Wednesday’s “Mad Money.”

Based in Northfield, Ill., Kraft is the largest packaged food company in the United States. Its products are found in 99 percent of American households, Cramer said. Some investors may think this company sounds boring, but Cramer noted that boring, dividend-paying stocks were the savior of many individual’s portfolios last year. After all, high-yielding stocks pay investors to wait until the stock market calms and the economy improves. So no matter what’s going on in the world, dividend-paying stocks are still turning investors a profit. For its part, Kraft sports a 3.1 percent dividend yield.

In addition to Kraft’s dividend, Cramer likes the stock because of the company’s plans to break-up. He thinks management can unlock value by splitting the company into two parts: a fast-growing snacks company called SnackCo. and a domestic grocery business named GroceryCo. The split won’t likely happen until the end of the year, but in the meantime, Cramer thinks Kraft’s stock will rise in anticipation. So he thinks the stock is a great buy at current levels and wouldn’t be surprised if it outperforms the Dow.

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  • Jim Cramer

    Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

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