Why Nomad Foods is the Most Undervalued High-Yield Dividend Stock to Buy in 2026

In the current investment landscape, where markets often overreact to short-term volatility, companies executing disciplined turnaround strategies can offer compelling opportunities. Nomad Foods, Europe's leading frozen food producer, fits this profile. With a dividend yield of 5.65% in early 2026, a forward P/E ratio of 11.14, and a €200 million efficiency program underway, the company is poised to deliver value creation through share buybacks, cost optimization, and strategic sector positioning. For investors seeking high-yield stocks with a path to sustainable growth, Nomad Foods represents an undervalued gem.

Share Buybacks and Valuation: A Catalyst for Earnings Power

Nomad Foods' 2025 share buyback program has already begun to reshape its capital structure. By reducing the number of outstanding shares, the company has created upward pressure on earnings per share (EPS), even as adjusted EPS dipped to €0.49 in Q3 2025 due to macroeconomic headwinds. This reduction in share count, combined with a trailing P/E of 8.17, suggests the market is underestimating the long-term benefits of the buyback program. Share repurchases are a classic tool of value creation, particularly for companies with strong free cash flow generation. Nomad's forward P/E of 11.14 implies that the market is not fully pricing in the potential for earnings accretion as the buyback program progresses. For turnaround investors, this represents a margin of safety: a low valuation paired with a clear plan to enhance shareholder value.

Cost Optimization: Fueling EBITDA and Free Cash Flow Growth

At the heart of Nomad Foods' turnaround is a €200 million efficiency program spanning 2026 to 2028. This initiative targets operational savings through improved manufacturing network utilization, logistics cost reductions, and overhead efficiencies. These measures are critical in an environment where inflationary pressures have squeezed margins. By 2028, the program is expected to deliver compound annual Adjusted EBITDA growth of 1-3% and Free Cash Flow growth of approximately 15% compared to 2023-2025 levels. Such disciplined cost management not only stabilizes margins but also funds reinvestment in premium product lines and digital marketing, aligning with consumer trends toward convenience and health-conscious eating. For investors, this dual focus on cost discipline and innovation signals a company that is both defensive and growth-oriented-a rare combination in mature sectors.

Sector Positioning: Capturing Growth in a Resilient Market

. Nomad Foods operates in a sector poised for long-term expansion. The European frozen food market, valued at €40.20 billion in 2024, is projected to grow at a 5.8% compound annual rate through 2032. With an 18% share of Western Europe's €22 billion savory frozen food market, Nomad is well-positioned to benefit from this tailwind. Its strategic initiatives-such as the 2026 rollout of a new multi-media Masterbrand campaign for Birds Eye and the launch of protein-rich products like the get Real meal bowl-are designed to capture market share in categories with strong consumer demand. Moreover, the company's emphasis on sustainability and digital engagement aligns with broader industry trends, ensuring its relevance in an increasingly competitive landscape.

Dividend Sustainability: A High-Yield Backed by Prudence

Nomad Foods' commitment to shareholder returns has remained steadfast, even during periods of weak performance. In Q3 2025, despite a 13% revenue decline and softer demand in the UK, the company increased its quarterly dividend by 13% compared to 2024 levels. This resilience underscores management's prioritization of dividend sustainability. The €200 million efficiency program further bolsters confidence, as the savings generated will likely fund both reinvestment and continued dividend growth. For high-yield investors, this combination of a 5.65% yield and a robust cash flow foundation is hard to ignore.

Conclusion: A Turnaround with Legs

Nomad Foods exemplifies the principles of successful turnaround investing: a low valuation, a clear plan for cost optimization, and a sector with structural growth. While the company faces near-term challenges, including inflationary pressures and soft demand in key markets, its strategic initiatives are designed to address these headwinds directly. For investors with a medium-term horizon, the current discount to intrinsic value offers an attractive entry point. In a market where high-yield stocks often come with high risk, Nomad Foods stands out as a rare blend of income and value creation.