All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Kroger (KR) is headquartered in Cincinnati, and is in the Retail-Wholesale sector. The stock has seen a price change of 1.89% since the start of the year. The supermarket chain is paying out a dividend of $0.35 per share at the moment, with a dividend yield of 2.2% compared to the Retail - Supermarkets industry's yield of 2.08% and the S&P 500's yield of 1.44%.
Looking at dividend growth, the company's current annualized dividend of $1.40 is up 4.5% from last year. Over the last 5 years, Kroger has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.19%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Kroger's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for KR for this fiscal year. The Zacks Consensus Estimate for 2026 is $5.24 per share, with earnings expected to increase 8.04% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, KR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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The Kroger Co. (KR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).