Krispy Kreme (NASDAQ:DNUT) Has Announced A Dividend Of $0.035

The board of Krispy Kreme, Inc. (NASDAQ:DNUT) has announced that it will pay a dividend on the 9th of November, with investors receiving $0.035 per share. The dividend yield is 1.1% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Krispy Kreme

Krispy Kreme's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Krispy Kreme isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 25%, which we would be comfortable to see continuing.

Krispy Kreme Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The most recent annual payment of $0.14 is about the same as the annual payment 2 years ago. Krispy Kreme hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Krispy Kreme has been growing its earnings per share at 24% a year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

The Dividend Could Prove To Be Unreliable

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 would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Krispy Kreme that investors should take into consideration. Is Krispy Kreme not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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