Krispy Kreme (NASDAQ:DNUT) Is Due To Pay A Dividend Of $0.035

Krispy Kreme, Inc. (NASDAQ:DNUT) has announced that it will pay a dividend of $0.035 per share on the 10th of May. This payment means the dividend yield will be 1.1%, which is below the average for the industry.

View our latest analysis for Krispy Kreme

Krispy Kreme's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Krispy Kreme is unprofitable despite paying a dividend, and it is paying out 1,089% of its free cash flow. This makes us feel that the dividend will be hard to maintain.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 49%, which makes us pretty comfortable with the sustainability of the dividend.

Krispy Kreme Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Company Could Face Some Challenges Growing The Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Krispy Kreme has been growing its earnings per share at 13% a year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent 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. 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. We don't think Krispy Kreme is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 9 analysts we track are forecasting for Krispy Kreme for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.