Our analysis is based on comparing Kellogg Co. with the following peers – General Mills, Inc., Mondelez International, Inc. Class A, TreeHouse Foods, Inc., PepsiCo, Inc., Hain Celestial Group, Inc., Post Holdings, Inc., Tyson Foods, Inc. Class A and Flowers Foods, Inc. (GIS-US, MDLZ-US, THS-US, PEP-US, HAIN-US, POST-US, TSN-US and FLO-US).
Kellogg Co.’s dividend yield is 2.15 percent and its dividend payout is 93.64 percent. This compares to a peer average dividend yield of 2.35 percent and a payout level of 66.78 percent. This combination of a relatively lower dividend yield and a higher payout ratio suggest that the dividend payout might not be sustainable. Supporting this is the company’s average dividend quality score of 50 out of a possible score of 100, which points to some weakness in being able to sustain the higher payout ratio.
Dividend Quality Overview
- Over the last twelve months (prior to March 31, 2017), K-US paid a high quality dividend, which represents a yield of 2.84% at the current price.
- Dividend quality trend has not been consistent over the last five years. Dividends were paid during each of these years — of these 3 were high quality, 1 was medium quality and 1 was low quality.
- The ending cash balance is less than the last full year dividend payment and cannot be relied on to cushion any significant reduction of cash flows in the future.
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Over the last twelve months (prior to March 31, 2017), K-US paid a high quality dividend.
The source of the company’s cash to support the dividend paid over the last twelve months is operating cash flow (coverage of 2.54x), investing cash flow (coverage of -1.20x), issuance cash flow (coverage of -0.29x) and twelve-month prior cash (coverage of 0.43x), for a total dividend coverage of 1.41x.
K-US‘s issuance cash flow includes outflows from net debt repayment (coverage of -0.14x) and net share buybacks (coverage of -0.15x). Thus, the total coverage including share buybacks is 1.56x, which reflects our assumption that the cash paid for share buybacks is discretionary and could instead be used to pay dividends.
These coverage ratio factors imply that the firm’s dividends are wholly paid from operating and investing cash flows net of any debt repayments, which suggests a high dividend quality.
|Dividend Yield (%)||3.11||2.95||2.92||2.77||2.77||2.15|
|Dividend Payout (%)||65.17||36.36||108.23||115.12||104.08||93.64|
A complete list of metrics and analysis is available on the company page.
Kellogg Co. engages in the manufacturing, marketing, and distribution of cereal and convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles, and meat alternatives. It operates through the following segments: U.S. Morning Foods, U.S. Snacks, U.S. Specialty, North America Other, Europe, Latin America, and Asia Pacific. The U.S. Morning Foods segment includes cereal, toaster pastries, health and wellness bars, and beverages. The U.S. Snacks segment offers cookies, crackers, cereal bars, savory snacks, and fruit-flavored snacks. The U.S. Specialty segment represents food away from home channels, including food service, convenience, vending, Girl Scouts, and food manufacturing. The North America Other segment includes U.S. Frozen, Kashi, and Canada operating segments. The Europe segment consists of European countries. The Latin America segment comprises of Central and South America and includes Mexico. The Asia Pacific segment compose of Sub-Saharan Africa, Australia, and Asian and Pacific markets. The company was founded by Will Keith Kellogg in 1906 and is located in Battle Creek, MI.
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