Only 4 Days Left To Cash In On Keurig Dr Pepper Inc.'s (NYSE:KDP) Dividend
Keurig Dr Pepper Inc. (NYSE:KDP) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 2nd of April in order to receive the dividend, which the company will pay on the 17th of April.
Keurig Dr Pepper's upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.60 per share to shareholders. Calculating the last year's worth of payments shows that Keurig Dr Pepper has a trailing yield of 2.5% on the current share price of $24.38. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Keurig Dr Pepper can afford its dividend, and if the dividend could grow.
See our latest analysis for Keurig Dr Pepper
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Keurig Dr Pepper paid out 67% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Keurig Dr Pepper generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 40% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Keurig Dr Pepper's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Keurig Dr Pepper's earnings per share have fallen at approximately 25% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Keurig Dr Pepper's dividend payments are effectively flat on where they were two years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
Final Takeaway
From a dividend perspective, should investors buy or avoid Keurig Dr Pepper? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. All things considered, we are not particularly enthused about Keurig Dr Pepper from a dividend perspective.
If you want to look further into Keurig Dr Pepper, it's worth knowing the risks this business faces. To help with this, we've discovered 3 warning signs for Keurig Dr Pepper (1 is potentially serious!) that you ought to be aware of before buying the shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
