Kerry Group's (ISE:KRZ) Dividend Will Be Increased To €0.67

Kerry Group plc (ISE:KRZ) has announced that it will be increasing its dividend on the 6th of May to €0.67. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

View our latest analysis for Kerry Group

Kerry Group's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Kerry Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 13.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 28%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Kerry Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was €0.32 in 2012, and the most recent fiscal year payment was €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

The company's investors will be pleased to have been receiving dividend income for some time. Kerry Group has impressed us by growing EPS at 7.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Kerry Group's prospects of growing its dividend payments in the future.

Kerry Group Looks Like A Great Dividend Stock

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 earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. 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. Is Kerry Group 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.