Kroger's (NYSE:KR) Dividend Will Be $0.32

The Kroger Co. (NYSE:KR) will pay a dividend of $0.32 on the 1st of December. This will take the dividend yield to an attractive 2.3%, providing a nice boost to shareholder returns.

View our latest analysis for Kroger

Kroger's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Kroger's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 19.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Kroger Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.33 in 2014 to the most recent total annual payment of $1.28. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Kroger has been growing its earnings per share at 14% a year over the past five years. Kroger definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Kroger Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Kroger that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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