Assessing the Sustainability and Growth of Kroger's Dividends
The Kroger Co (KR, Financial) recently announced a dividend of $0.29 per share, payable on 2023-12-01, with the ex-dividend date set for 2023-11-14. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into The Kroger Co's dividend performance and assess its sustainability.
What Does The Kroger Co Do?
Kroger is the leading American grocer, with 2,719 supermarkets operating under several banners throughout the country at the end of fiscal 2022. Around 83% of stores have pharmacies, while nearly 60% also sell fuel. The company also operates roughly 120 fine jewelry stores. Kroger features a leading private-label offering and manufactures around 30% of its own-brand units (and more than 40% of its grocery own-label assortment) itself in 33 food production plants nationwide. Kroger is a top-two grocer in most of its major markets (as of early 2021, according to company data). Virtually all of Kroger's sales come from the United States. Kroger has offered to acquire no-moat Albertsons in a $25 billion deal; if the transaction is approved by regulators, it should close in 2024.
A Glimpse at The Kroger Co's Dividend History
The Kroger Co has maintained a consistent dividend payment record since 2006, with dividends distributed on a quarterly basis. The Kroger Co has increased its dividend each year since 2007. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 16 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down The Kroger Co's Dividend Yield and Growth
As of today, The Kroger Co currently has a 12-month trailing dividend yield of 2.43% and a 12-month forward dividend yield of 2.64%, suggesting an expectation of increased dividend payments over the next 12 months. Over the past three years, The Kroger Co's annual dividend growth rate was 16.10%. Extended to a five-year horizon, this rate decreased to 13.90% per year. And over the past decade, The Kroger Co's annual dividends per share growth rate stands at an impressive 13.00%.
Based on The Kroger Co's dividend yield and five-year growth rate, the 5-year yield on cost of The Kroger Co stock as of today is approximately 4.66%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-07-31, The Kroger Co's dividend payout ratio is 0.46.
The Kroger Co's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks The Kroger Co's profitability 9 out of 10 as of 2023-07-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
The Kroger Co's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors. The Kroger Co's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model with an average increase of approximately 10.30% per year, outperforming approximately 69.1% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. The Kroger Co's earnings have increased by approximately 24.50% per year on average, outperforming approximately 66.8% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 17.40% outperforms approximately 70.29% of global competitors.
Next Steps
In conclusion, The Kroger Co's consistent dividend payments, robust dividend growth rate, manageable payout ratio, strong profitability, and impressive growth metrics collectively paint a promising picture for current and potential investors. The company's ability to maintain and grow its dividend in the face of industry challenges and market dynamics is noteworthy. As The Kroger Co continues to navigate the competitive grocery landscape and works towards completing its acquisition of Albertsons, investors should keep a close eye on the company's financial health and market position. Will The Kroger Co sustain its dividend achiever status in the years to come? That remains a key question for value investors seeking reliable income streams. For those looking to explore further, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
