Kerry Group (ISE:KRZ) Is Increasing Its Dividend To €0.28

Kerry Group plc (ISE:KRZ) has announced that it will be increasing its dividend on the 12th of November to €0.28. Although the dividend is now higher, the yield is only 0.7%, which is below the industry average.

View our latest analysis for Kerry Group

Kerry Group's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Kerry Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 16.5% over the next year. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

Kerry Group 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. Since 2011, the first annual payment was €0.26, compared to the most recent full-year payment of €0.89. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Kerry Group May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Kerry Group has only grown its earnings per share at 2.0% per annum over the past five years. If Kerry Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Kerry Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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