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Analyzing Kroger’s Dividend Yield and Payout

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A consistent dividend-paying company

Kroger has paid regular dividends over the last 11 years. The company uses its cash flow from operations to repurchase shares and fund its dividend.

Between fiscal 2013 and fiscal 2016, the company returned $1.3 billion to its shareholders through dividends and $3.8 billion through share repurchases. In fiscal 1Q17, the company paid $397 million in dividends and repurchased $1.1 billion worth of common shares.

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Recent dividend and share repurchase announcement

In June this year, Kroger announced a dividend of $0.12 per share, raising its quarterly dividend payments by 14%. The company also announced a new $500 million buyback program to replace its exhausted previous authorization plan.

Investors looking for exposure to Kroger through ETFs can invest in the SPDR Consumer Staples Select Sector ETF (XLP). KR makes up 1.8% of XLP.

Comparing dividend yields

Kroger’s one-year forward dividend yield is currently hovering around 1.4% as of September 1, 2016. Big box retailers Walmart (WMT) and Target (TGT) offer higher yields of 2.8% and 3.3%, respectively. Both companies are dividend aristocrats and have increased their dividends for 43 and 45 years straight, respectively.

Growth in Kroger’s dividend

Kroger offers a low yield, but it has increased its dividend per share every year for the last ten years. Its dividend per share has risen at a CAGR (compound annual growth rate) of more than 15% over the last five years.

The company’s average dividend payout ratio over the last three years stands at 20%, indicating that its dividends consume 20% of its earnings. For Whole Foods Market (WFM), this ratio stands at about 35%.

Despite delivering solid earnings performances and being a consistent dividend payer, Kroger has witnessed some ratings downgrades recently. Read the next part of this series to learn about Wall Street’s outlook on Kroger and the reason for its recent ratings revisions.

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