Campbell Soup (NASDAQ:CPB) Is Due To Pay A Dividend Of $0.37

Campbell Soup Company (NASDAQ:CPB) has announced that it will pay a dividend of $0.37 per share on the 28th of October. This means the dividend yield will be fairly typical at 2.9%.

View our latest analysis for Campbell Soup

Campbell Soup's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Campbell Soup's dividend made up quite a large proportion of earnings but only 66% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 94.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 41% which brings it into quite a comfortable range.

Campbell Soup Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $1.25 total annually to $1.48. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Campbell Soup has only grown its earnings per share at 3.8% per annum over the past five years. Campbell Soup's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Campbell Soup's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Campbell Soup is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Campbell Soup has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.