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

Krispy Kreme, Inc.'s (NASDAQ:DNUT) investors are due to receive a payment of $0.035 per share on 7th of February. The dividend yield is 1.1% based on this payment, which is a little bit low compared to the other companies in the industry.

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. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 6.4%, which we would be comfortable to see continuing.

Krispy Kreme Is Still Building Its Track Record

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 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. Krispy Kreme has impressed us by growing EPS at 19% per year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Krispy Kreme's payments, as there could be some issues with sustaining them into the future. Strong earnings growth means Krispy Kreme has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 10 analysts we track are forecasting for Krispy Kreme for free with public analyst estimates for the company. 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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