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Are You Looking for a High-Growth Dividend Stock?

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Kroger in Focus

Based in Cincinnati, Kroger (KR) is in the Retail-Wholesale sector, and so far this year, shares have seen a price change of 7.13%. Currently paying a dividend of $0.26 per share, the company has a dividend yield of 2.18%. In comparison, the Retail - Supermarkets industry's yield is 2.03%, while the S&P 500's yield is 1.74%.

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Looking at dividend growth, the company's current annualized dividend of $1.04 is up 10.6% 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 14.57%. Future dividend growth will depend on earnings growth as well as 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 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.

KR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.49 per share, representing a year-over-year earnings growth rate of 6.15%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that KR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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The Kroger Co. (KR) : Free Stock Analysis Report

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Zacks Investment Research