Kroger (NYSE: KR) is one of the world’s largest food retailers and has a long history of paying dividends. But many investors ask: is Kroger’s dividend safe going forward? To answer this, let’s look at the business and Kroger’s dividend trends.
The company is valued at $25 billion and generated $122.7 billion in sales last year. The business operates out of Cincinnati, Ohio and employs almost half a million people. Kroger’s revenue breaks down to $273 thousand per employee.
Kroger maintains an S&P credit rating of BBB. This allows Kroger to issue cheap debt to grow its business and pay dividends to shareholders.
One area where Kroger is focusing is ESG investing. The business is improving its supply chain while trying to minimize waste. Minimizing waste often costs more up front, but it can help the business in the long term.
Kroger’s Dividend History Over 10 Years
Kroger paid investors $0.18 dividend per share a decade ago. But since then, the Kroger dividend has climbed to $0.49. That’s a 172% increase!
Kroger Dividend History 10-Years
The compound annual growth is 10.5% over 10 years… but over the last year, the dividend climbed 5.4%. The slowdown in dividend growth isn’t a good indicator. However, Kroger still might be a good income investment. Let’s look at the dividend yield.
Kroger’s Current Dividend Yield vs. 10-Year Average
Kroger’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital, and we’ll look at that soon.
The dividend yield comes in at 1.77%, which is close to the 10-year average of 1.82%. The chart below shows the dividend yield over the last 10 years.
Kroger Current Dividend Yield vs. 10-Year Average
Less than a 2% dividend isn’t great, but it’s around Kroger’s average. Let’s look at the dividend payout ratio.
Is Kroger’s Dividend Safe?
Many investors look at payout ratio to determine dividend safety. Payout ratio is calculated by taking the dividend per share divided by the net income per share. So a payout ratio of 60% would mean that for every $1 Kroger earns, it pays investors $0.60.
Payout ratio is a good indicator of dividend safety… but accountants can manipulate net income. They adjust for goodwill and other non-cash items. A better metric is free cash flow.
Here’s Kroger payout ratio based on free cash flow over the last 10 years.
Kroger’s Dividend Payout Safety
The ratio is volatile over the last 10 years, and the trend is up. The last reported year shows a payout ratio of 72.6%. This doesn’t give much wiggle room for Kroger’s board of directors to raise the dividend.
Closing Thoughts: Kroger’s Dividend History and Safety
Kroger is a giant in the food retailer space. This provides some protection against downturns, and steady cash flows also help. However, the dividend yield isn’t very high and the payout ratio trend is concerning. You might want to shop for better dividend stocks in the current market.
If you’re interested in seeing more dividend research, please comment below. You can also check out our free dividend reinvestment calculator.
Good investing,
Rob
