Kerry Group (ISE:KRZ) Has Announced That It Will Be Increasing Its Dividend To €0.67

The board of Kerry Group plc (ISE:KRZ) has announced that it will be increasing its dividend on the 6th of May to €0.67. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

View our latest analysis for Kerry Group

Kerry Group's Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Kerry Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 15.0% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 29%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Kerry Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was €0.32, compared to the most recent full-year payment of €0.95. This means that it has been growing its distributions at 11% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see Kerry Group has been growing its earnings per share at 7.3% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Kerry Group's Dividend

Overall, a dividend increase is always good, and we think that Kerry Group is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 Kerry Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.