Krispy Kreme (NASDAQ:DNUT) Has Affirmed Its Dividend Of $0.035

The board of Krispy Kreme, Inc. (NASDAQ:DNUT) has announced that it will pay a dividend on the 7th of August, with investors receiving $0.035 per share. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Krispy Kreme

Krispy Kreme's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even in the absence of profits, Krispy Kreme is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 7.9%, so there isn't too much pressure on the dividend.

Krispy Kreme Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The last annual payment of $0.14 was flat on the annual payment from3 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Company Could Face Some Challenges Growing The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Krispy Kreme has been growing its earnings per share at 28% a year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

Krispy Kreme's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Krispy Kreme is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Krispy Kreme that investors need to be conscious of moving forward. 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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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.

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