After a hot five days that saw nearly 20 companies hike their payouts, last week was somewhat cooler, with only a few stray issuers raising their dividends.
That's likely to be the rule rather than the exception until late July, when the new earnings season kicks into gear (many stocks announce dividend lifts concurrent with earnings). So while we sip a well-chilled beverage and hope for more action, here's a look at a trio of last week's raisers.
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Kroger
Big supermarket chain operator Kroger (KR 0.56%) is bumping its quarterly payout by 4% to just under $0.13 per share. This was entirely in character for the company, which has raised its dividend once every year for over a decade.
Kroger also said its board has authorized a fresh $1 billion stock buyback program.
The company has had its struggles lately. Buffeted by competition and the falling prices of staple food items, revenue in its most recently reported quarter rose by less than 3% on a year-over-year basis, excluding fuel sales. This was on the back of an incremental drop in same-store sales -- Kroger's first decline in more than 50 quarters. Net profit cratered by 22%, and forward guidance was trimmed.
Kroger likes to spend money on dividends and share buybacks, and in certain fiscal years, it has done so in excess of its free cash flow. Over the last 12 months, however, FCF has risen, while total buybacks have declined. We should remember, though, that this is food retail -- margins are thin in this business, and finances always seem to be on a knife edge. Kroger is a veteran operator, so if I were a gambling man, I'd bet it'll figure out a way to at least sustain its current dividend.
KR Free Cash Flow (TTM). Data by YCharts.
Said distribution will next be paid on Sept. 1 to stockholders of record as of Aug. 15. At the most recent closing share price, it would yield 2.2%, slightly higher than the 1.9% average of dividend-paying stocks on the S&P 500.
Medtronic
Medtronic (MDT 0.14%), which just announced a 7% hike in its quarterly dividend to $0.46 per share, is a habitual raiser. So habitual that it's a Dividend Aristocrat -- one of the few, proud stocks that have lifted their payouts at least once annually for a minimum of 25 years in a row.
Like Kroger, it'll also dip into the coffers to buy back stock -- its board has authorized up to $5 billion for that purpose.
Due to Medtronic's size and breadth -- it makes nearly every type of medical device imaginable -- growth hasn't been explosive; the most recent annual bottom-line figure wasn't significantly higher than it was four years ago. Regardless, the company is reliably profitable, netting almost $1.2 billion on nearly $8 billion in revenue in its most recently reported quarter.
MDT Revenue (Annual). Data by YCharts.
Meanwhile, in fiscal 2017 it managed to grow both its operating and free cash flow at encouraging rates, with the latter rising 35% on a year-over-year basis to over $5.6 billion. Yet this was barely enough to cover the company's higher spend on stock repurchases and dividend payments.
Comfortingly, Dividend Aristocrats tend to do what they must to maintain their status. I'd imagine Medtronic will pull back on the share repurchases if FCF starts to erode, rather than touch the dividend. So my instincts tell me that the company's going to keep that long raise streak alive.
Medtronic's new dividend will be dispensed on July 26 to shareholders of record as of July 7. It would yield just under 2.1%.
Shoe Carnival
Shoe Carnival (SCVL -0.58%) is adding a little lift to its loafers with a 7% increase in the quarterly dividend. The footwear retailer will pay its investors just under $0.08 per share.
Will that be sufficient to bring back optimism to the stock? Shoe Carnival has been a bit of a worn sneaker this year, which wasn't helped by a first quarter in which it reported a fall in comparable-store sales by nearly 4%. Net sales and profit also went south, with the former dropping 3% to $253 million and the latter declining far more steeply at 23% (to just over $8 million). On top of that, the company lowered its estimates for both line items for the full year.
In spite of its dispiriting fundamentals, Shoe Carnival has done a good job of lifting its annual cash flow figures -- FCF was almost 37% higher in 2017 on a year-over-year basis, landing at just under $42 million. However, that was swallowed by slightly higher spending on share repurchases, to say nothing of the over $5 million the company paid out in dividends. As it recently refreshed its $50 million buyback initiative, outlays in the immediate future will probably be similar. So perhaps it's best not to count on the future sustainability of this dividend.
Shoe Carnival will distribute its next payout on July 17 to stockholders of record as of July 3. It would yield a theoretical 1.5% at the current share price.
