Kraft Heinz (NASDAQ:KHC) Is Paying Out A Dividend Of $0.40
The board of The Kraft Heinz Company (NASDAQ:KHC) has announced that it will pay a dividend on the 26th of December, with investors receiving $0.40 per share. The dividend yield will be 6.6% based on this payment which is still above the industry average.
Estimates Indicate Kraft Heinz's Dividend Coverage Likely To Improve
If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though Kraft Heinz isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 14%, which we would be comfortable to see continuing.
See our latest analysis for Kraft Heinz
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $2.30 in 2015, and the most recent fiscal year payment was $1.60. This works out to be a decline of approximately 3.6% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Kraft Heinz's earnings per share has shrunk at 13% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Kraft Heinz's Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kraft Heinz's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Kraft Heinz that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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