Keurig Dr Pepper (NASDAQ:KDP) Is Due To Pay A Dividend Of $0.23
Keurig Dr Pepper Inc. (NASDAQ:KDP) will pay a dividend of $0.23 per share on October 10, representing an annual yield of 3.4%. The company has a solid but short dividend history of 7 years, with a growth rate of 6.3% since 2018. While earnings per share are forecasted to rise by 126.8% next year, the current payout ratio is high at 79%, raising concerns about sustainability. Investors are advised to consider other factors and potential warning signs before investing.
The board of Keurig Dr Pepper Inc. (NASDAQ:KDP) has announced that it will pay a dividend on the 10th of October, with investors receiving $0.23 per share. This means the annual payment is 3.4% of the current stock price, which is above the average for the industry.
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Keurig Dr Pepper's Projected Earnings Seem Likely To Cover Future Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend made up a very large portion of earnings and also represented 79% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Looking forward, earnings per share is forecast to rise by 126.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
See our latest analysis for Keurig Dr Pepper
Keurig Dr Pepper Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the dividend has gone from $0.60 total annually to $0.92. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. Keurig Dr Pepper has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.
We Could See Keurig Dr Pepper's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Keurig Dr Pepper has been growing its earnings per share at 6.4% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
Our Thoughts On Keurig Dr Pepper's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Keurig Dr Pepper (1 can't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
