Kroger's (NYSE:KR) Upcoming Dividend Will Be Larger Than Last Year's

The board of The Kroger Co. (NYSE:KR) has announced that it will be increasing its dividend by 9.4% on the 1st of September to $0.35, up from last year's comparable payment of $0.32. This will take the dividend yield to an attractive 1.7%, providing a nice boost to shareholder returns.

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Kroger's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Kroger's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 46.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Kroger

Kroger Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.33 in 2015 to the most recent total annual payment of $1.28. This means that it has been growing its distributions at 15% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Kroger has seen EPS rising for the last five years, at 8.3% per annum. Kroger definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Kroger's Dividend

Overall, a dividend increase is always good, and we think that Kroger is a strong income stock thanks to its track record and growing earnings. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Kroger that investors should know about before committing capital to this stock. Is Kroger not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.