Krispy Kreme, Inc.'s (NASDAQ:DNUT) investors are due to receive a payment of $0.035 per share on 7th of August. The dividend yield is 1.1% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Krispy Kreme

Krispy Kreme's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Despite not generating a profit, Krispy Kreme is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 6.0%, which makes us pretty comfortable with the sustainability of the dividend.

Krispy Kreme Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. There hasn't been much of a change in the dividend over the last 3 years. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Krispy Kreme has grown earnings per share at 28% per year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Krispy Kreme's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Krispy Kreme's payments, as there could be some issues with sustaining them into the future. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Krispy Kreme that investors should know about before committing capital to this stock. Is Krispy Kreme not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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