Keurig Dr Pepper's (NASDAQ:KDP) Upcoming Dividend Will Be Larger Than Last Year's

Keurig Dr Pepper Inc. (NASDAQ:KDP) will increase its dividend on the 11th of October to $0.23, which is 7.0% higher than last year's payment from the same period of $0.215. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

Check out our latest analysis for Keurig Dr Pepper

Keurig Dr Pepper's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment was quite easily covered by earnings, but it made up 114% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 25.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

Keurig Dr Pepper Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the annual payment back then was $0.60, compared to the most recent full-year payment of $0.86. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. Keurig Dr Pepper has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Keurig Dr Pepper has grown earnings per share at 19% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Keurig Dr Pepper's payments are rock solid. While Keurig Dr Pepper is earning enough to cover the payments, the cash flows are lacking. We don't think Keurig Dr Pepper is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Keurig Dr Pepper (1 shouldn't be ignored!) that you should be aware of before investing. 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.