Last update on 2024-06-27

Kellogg (K) - Dividend Analysis (Final Score: 7/8)

Kellogg's dividend analysis gives a final score of 7/8, highlighting its stable and attractive income-generating investment over the last 20 years.

Short Analysis - Dividend Score: 7

We're running Kellogg (K) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that measures the annual dividend payout relative to the current stock price. A higher dividend yield can indicate a good income-generating investment.

Kellogg’s dividend yield of 3.991% significantly exceeds the industry average of 1.77%. Over the past 20 years, Kellogg’s dividend yield has generally stayed above the industry average, highlighting its position as a reliable dividend payer. Particularly in 2018, the yield peaked at 4.1098%, showing a marked response to stock price declines. This trend suggests that Kellogg has maintained strong dividend policies, making it attractive to income-focused investors. Moreover, with consistent dividend-per-share growth from $1.01 in 2003 to approximately $2.23 in recent years while their stock price fluctuated, Kellogg demonstrates stability and commitment to returning value to shareholders. This trend is favorable for dividend-seeking investors.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments. It's a crucial metric as it indicates the company's ability to increase dividends, reflecting its profitability and financial health. A growth rate higher than 5% is typically a good indicator of robust financial performance.

Analyzing Kellogg's dividend per share ratio over the last 20 years, we see substantial variability. Calculating the Compound Annual Growth Rate (CAGR) using the dividend per share values from 2003 through 2023, the results indicate an overall growth fluctuation, including negatives and extraordinary spikes. The average dividend ratio is 3.8991, which does not meet the 5% threshold, suggesting Kellogg's dividend growth performance is below expectations. Especially, the negative ratios in recent years indicate inconsistencies, which could be a red flag for investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% in the last 20 years

The average payout ratio for Kellogg (K) over the last 20 years stands at 62.815%, which is below the 65% threshold. A lower payout ratio generally indicates that a company is retaining more earnings for growth, which is favorable. However, notable spikes in 2014, 2015 influenced the stability of the dividend distribution, which is worth monitoring.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The criterion 'Dividends are well covered by the earnings' is evaluated by calculating the coverage ratio, which essentially assesses the proportion of earnings that go toward paying dividends. This proportion is typically reflected in the formula: Dividend Payout Ratio = Dividend per Share / Earnings per Share. A lower ratio generally indicates that a company is retaining a larger portion of its earnings for growth or other expenditures, which could be seen as positive from a sustainability perspective. For Kellogg (K), the coverage fluctuates significantly from year to year. In 2012 and 2013, there is an unusual spike in the ratio to over 1, indicating that the company paid out more in dividends than it earned in those years. Generally, this is not considered to be sustainable. However, in most other years, the payout ratio remains below 1. As per the data provided, Kellogg seems to have maintained a sensible payout ratio, mostly below the critical threshold, fluctuating between approximately 0.45 and 0.80. The trends showcased in 2012 and 2013 should be highlighted for further scrutiny. Overall, the trend appears to be sustainable, indicating a good coverage of dividends by the earnings, with necessary caution flagged for years with high ratios.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

The criterion examines if the company's free cash flow (FCF) sufficiently covers its dividend payouts. Entries above 1 indicate that dividends are consistently covered by FCF.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Kellogg (K) and why it is important to consider

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Dividends Paid for Over 25 Years?

The criterion examines if Kellogg has consistently paid dividends for over 25 years, which is a signal of the company's financial health, reliability, and shareholder value.

The data provided indicates that Kellogg has consistently paid dividends for at least the last 25 years. Starting in 1998, with a dividend per share of $0.92, there has been a steady upward trend each year until 2023, reaching $2.2314 per share. This consistent payment and gradual increase in dividends over a quarter-century reflect positively on Kellogg's financial stability and ability to generate profits. Such a reliable dividend payout is attractive to income-focused investors and showcases Kellogg's commitment to returning value to its shareholders. Therefore, this trend is good for assessing the company's dividend consistency and financial health.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Kellogg (K) and why it is important to consider

Reliable stock repurchases demonstrate a company's commitment to returning value to shareholders by reducing the number of outstanding shares, thus increasing EPS and often supporting stock price. Over the past 20 years, Kellogg has shown consistent buybacks, as evidenced by the listed reliable repurchase years. For example, the number of shares decreased from 409.95 million in 2003 to 342.09 million in 2023. This trend of reducing shares outstanding generally indicates prudent capital management. However, the average repurchase rate of -0.889% suggests a modest reduction on an annual basis. Considering buybacks were less frequent or smaller in some years, this strategy seems to have contributed positively towards creating shareholder value over the long term.