Kraft Heinz (NASDAQ:KHC) Will Pay A Dividend Of $0.40

The Kraft Heinz Company (NASDAQ:KHC) has announced that it will pay a dividend of $0.40 per share on the 29th of March. The dividend yield will be 4.6% based on this payment which is still above the industry average.

View our latest analysis for Kraft Heinz

Kraft Heinz's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Kraft Heinz was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 48.7%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Kraft Heinz's Dividend Has Lacked Consistency

Looking back, Kraft Heinz's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the annual payment back then was $2.30, compared to the most recent full-year payment of $1.60. The dividend has shrunk at around 4.4% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Kraft Heinz has been growing its earnings per share at 72% a year over the past five years. Kraft Heinz is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Kraft Heinz Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Kraft Heinz might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Kraft Heinz that investors should take into consideration. 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.