Kroger (NYSE:KR) Is Increasing Its Dividend To $0.32

Simply Wall St · 07/01 10:16

The Kroger Co.'s (NYSE:KR) periodic dividend will be increasing on the 1st of September to $0.32, with investors receiving 10% more than last year's $0.29. This takes the dividend yield to 2.3%, which shareholders will be pleased with.

View our latest analysis for Kroger

Kroger's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Kroger was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 56.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

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NYSE:KR Historic Dividend July 1st 2024

Kroger Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.30 in 2014 to the most recent total annual payment of $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Kroger Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Kroger has grown earnings per share at 5.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Kroger's prospects of growing its dividend payments in the future.

We Really Like Kroger's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Kroger that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.