Kerry Group (ISE:KRZ) Is Increasing Its Dividend To €0.734

The board of Kerry Group plc (ISE:KRZ) has announced that the dividend on 12th of May will be increased to €0.734, which will be 10% higher than last year's payment of €0.667 which covered the same period. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

Check out our latest analysis for Kerry Group

Kerry Group's Payment Has Solid Earnings Coverage

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 what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 56.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

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. The dividend has gone from an annual total of €0.322 in 2013 to the most recent total annual payment of €0.981. This works out to be a compound annual growth rate (CAGR) of approximately 12% 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.

Kerry Group May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Kerry Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Kerry Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Kerry Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for Kerry Group that investors should know about before committing capital to this stock. 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.