Kroger's (NYSE:KR) Dividend Will Be Increased To $0.35

The Kroger Co. (NYSE:KR) will increase its dividend on the 1st of September to $0.35, which is 9.4% higher than last year's payment from the same period of $0.32. This will take the annual payment to 1.8% of the stock price, which is above what most companies in the industry pay.

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Kroger's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Kroger was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 46.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Kroger

Kroger Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from $0.33 total annually to $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 15% 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.

We Could See Kroger's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Kroger has grown earnings per share at 8.3% per 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Kroger that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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