Krispy Kreme's (NASDAQ:DNUT) Dividend Will Be $0.035

Krispy Kreme, Inc. (NASDAQ:DNUT) has announced that it will pay a dividend of $0.035 per share on the 9th of August. Including this payment, the dividend yield on the stock will be 0.9%, which is a modest boost for shareholders' returns.

View our latest analysis for Krispy Kreme

Krispy Kreme's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. 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 27%, which we would be comfortable to see continuing.

Krispy Kreme Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The most recent annual payment of $0.14 is about the same as the annual payment 2 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 21% a year over the past five years. The company hasn't been turning a profit, but it running in the right direction. 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

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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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. 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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