Last Update 3/10/25
Kroger Co. (NYSE: KR) has been a cornerstone of the American grocery industry since 1883. With a nationwide presence and a strong focus on private-label brands, customer loyalty programs, and digital expansion, it has remained a dominant force in retail. Unlike many high-yield dividend stocks, Kroger isn’t about offering an eye-popping yield. Instead, it has built a reputation for consistent dividend growth, backed by stable earnings and strong cash flow.
For dividend investors, Kroger presents a compelling case. It operates in a relatively defensive industry, meaning it holds up well during economic downturns, and it has a long track record of rewarding shareholders with rising payouts.
Key Dividend Metrics
📈 Dividend Yield: 1.89%
💰 Annual Dividend Rate: $1.28
📆 Ex-Dividend Date: February 14, 2025
🏛️ Payout Ratio: 33.24%
📊 5-Year Average Dividend Yield: 2.01%
📈 Dividend Growth Streak: Over 18 years
🚀 Recent Dividend Increase: 11% in 2023
💵 Cash Flow Strength: $5.79 billion in operating cash flow
Dividend Overview
Kroger’s dividend yield sits at 1.89%, which isn’t the highest in the market, but it’s well-supported by strong financials. The company has consistently increased its dividend for nearly two decades, making it a reliable choice for investors seeking growing income over time.
The current payout ratio of 33.24% is a reassuring sign. It means that Kroger is paying out a relatively small portion of its earnings in dividends, leaving plenty of room for future increases. This also provides a safety cushion in case of economic slowdowns.
Looking at historical trends, Kroger’s dividend yield is slightly below its five-year average of 2.01%. This could indicate that the stock price has been appreciating, which makes sense given its strong performance over the past year.
Dividend Growth and Safety
Dividend growth is where Kroger really shines. The company has been steadily increasing its dividend for over 18 years, demonstrating a clear commitment to rewarding shareholders. In 2023, it boosted its payout by 11%, a sign that management remains confident in the company’s long-term cash flow.
The dividend safety profile is also strong. With a low payout ratio and substantial free cash flow, Kroger has plenty of financial flexibility to continue increasing dividends even in challenging economic conditions.
Another factor worth noting is the company’s aggressive share buyback program. Kroger has been repurchasing shares consistently, which reduces the number of shares outstanding and enhances earnings per share. This, in turn, strengthens the foundation for future dividend increases.
Chart Analysis
The Kroger Co. (KR) stock chart reveals a clear uptrend, with price action strengthening over the past several months. The stock has been riding above both the 50-day and 200-day simple moving averages, reinforcing the overall bullish sentiment. Recent price movements suggest strong momentum, with increased volume supporting the latest breakout.
Moving Averages and Trend Strength
The 50-day moving average is trending well above the 200-day moving average, signaling an established uptrend. This type of pattern often indicates sustained bullish momentum, as buyers continue to step in at higher price levels. The price has consistently bounced off the 50-day moving average, confirming it as a key level of support. The longer-term 200-day moving average is also sloping upward, suggesting the broader trend remains intact.
Volume and Market Participation
Volume data shows occasional spikes, most notably during key breakout periods. A large volume bar in December suggests strong buying activity, likely driven by positive news or earnings. Since then, volume has remained elevated compared to earlier in the year, which supports the continuation of the uptrend.
Relative Strength Index (RSI) and Momentum
The RSI is currently elevated, hovering near the overbought zone. This suggests the stock has been experiencing strong buying pressure, but it also raises the possibility of a short-term pullback or consolidation. If the RSI remains above 70 for an extended period, it could indicate overheating, leading to some profit-taking. However, if it holds in the 50-70 range, it would suggest sustained strength without extreme overvaluation.
Recent Candlestick Behavior
The last five candlesticks indicate increasing volatility, with larger daily ranges. The most recent candle has a strong upward close near the high of the day, showing that buyers remained in control despite some intraday selling pressure. The presence of long wicks in prior sessions suggests brief sell-offs were met with strong demand, preventing a deeper decline.
Key Support and Resistance Levels
The stock has been pushing into new highs, with $65 acting as a previous resistance level that has now turned into support. If the price pulls back, this area may serve as a critical test to determine whether the uptrend remains intact. On the upside, the next potential resistance zone appears near $68.50, which aligns with the highest levels seen in the past year. A break above this range could trigger further upside momentum.
Analyst Ratings
📈 Upgrades:
🔹 A recent upgrade came as analysts took a more optimistic view of Kroger’s digital expansion and loyalty-driven initiatives. One firm raised its rating, pointing to the company’s strong push into e-commerce and its Boost membership program, which has been gaining traction. The analysts also noted Kroger’s $5 billion share repurchase program, which signals confidence from management and provides additional value to shareholders. These factors led to a revised price target of 51, reflecting expectations of continued revenue growth and margin expansion.
📉 Downgrades:
🔻 On the other hand, another analyst firm took a more cautious stance, downgrading the stock due to concerns over inflationary pressures and potential margin compression. The grocery sector has been under pressure as rising costs impact both retailers and consumers, leading to uncertainty about how much Kroger can maintain its pricing power without sacrificing sales volume. The downgrade was also driven by expectations that higher interest rates could slow consumer spending, making discretionary purchases—outside of essentials—more vulnerable.
📊 Consensus Price Target:
📌 Analysts covering Kroger have a consensus price target of approximately 66.94, which suggests the stock is fairly valued at current levels. While some analysts remain bullish, with the highest target set at 75, others take a more conservative approach, with the lowest estimate at 52. This range highlights the mixed sentiment surrounding the stock, as Kroger continues to navigate both opportunities in digital retail and challenges in cost management.
Earning Report Summary
Kroger just released its latest earnings report, giving investors a look at how the company performed over the past quarter and the full year. While some numbers came in as expected, there were a few surprises—both good and bad.
Fourth-Quarter Performance
In the fourth quarter, Kroger brought in $34.31 billion in sales. That was slightly lower than what analysts had predicted, but earnings per share came in at $1.14, beating expectations of $1.09. The company also reported a 2.4% increase in identical sales, excluding fuel, which suggests steady demand. One of the more impressive numbers was an 11% jump in digital sales, showing that customers are embracing Kroger’s online shopping options more than ever.
Full-Year Highlights
For the entire year, Kroger generated $147.1 billion in total revenue. A big part of that came from digital sales, which contributed $13 billion, reinforcing how important online shopping has become for the company. Private-label brands also had a strong year, with over 900 new products introduced, giving shoppers more choices at competitive prices. Another standout was the alternative profit business, which pulled in $1.35 billion, thanks to strong growth in media-related revenue.
Profitability and Operating Metrics
Kroger’s adjusted FIFO operating profit for the year hit $4.7 billion. The company also reported a lower LIFO charge compared to last year, down to $95 million from $113 million. That signals better inventory management and an ability to navigate cost pressures more effectively.
Guidance for 2025
Looking ahead, Kroger expects identical sales, excluding fuel, to rise by 2% to 3%. Earnings per share are projected to land somewhere between $4.60 and $4.80. The company is also bracing for a LIFO charge of about $130 million, assuming inflation stays within the expected 1.5% to 2% range.
Strategic Initiatives
Kroger continues to lean into personalization and digital engagement. Customers saved 10% more on digital coupons this year, and the Boost membership program got a few upgrades, including new streaming benefits. On the physical retail side, Kroger is bucking the trend of store closures and actually plans to open new locations in 2025.
Leadership Changes
One major change coming is at the top. CEO Rodney McMullen is stepping down, and Ron Sargent will take over as interim CEO while the company searches for a permanent leader.
Overall, Kroger’s earnings report shows a company balancing traditional grocery sales with the growing demand for digital shopping. With new store openings and continued investment in online sales, the company looks set to keep evolving in an increasingly competitive market.
Financial Health and Stability
Kroger’s financial position is mostly solid, but there are some factors to keep an eye on.
✔️ Revenue Stability: With annual revenue exceeding $147 billion, Kroger has built a business that delivers steady cash flow. The grocery sector is naturally resilient, making Kroger a defensive play in uncertain economic times.
⚠️ Debt Levels: The company carries $21.15 billion in total debt, resulting in a high debt-to-equity ratio of 229.2%. While this might seem concerning, it’s common for large retailers to operate with significant leverage. The key factor is Kroger’s ability to service this debt, which remains manageable given its strong cash flow.
📊 Profit Margins:
- Net profit margin: 1.81% (low, but typical for grocery chains)
- Operating margin: 1.99% (stable, but under pressure from rising costs)
- Return on equity: 26.88% (a strong number that highlights management’s ability to generate returns on shareholder capital)
While the high debt levels are something to watch, Kroger’s cash flow remains robust, which helps offset concerns about financial stability.
Valuation and Stock Performance
🔍 Current Price: $67.72
📉 52-Week Range: $49.04 – $68.51
📊 Forward P/E Ratio: 14.41
📉 PEG Ratio: 1.46 (suggesting a reasonable valuation for expected growth)
Kroger’s valuation looks fair at current levels. A forward price-to-earnings ratio of 14.41 suggests the stock isn’t overly expensive, and the PEG ratio of 1.46 indicates that the stock is priced reasonably relative to its growth prospects.
Stock performance has been strong, with shares approaching their 52-week high of $68.51. The 200-day moving average of $56.96 shows that Kroger has been in an upward trend, which is a positive sign for investors looking for both capital appreciation and dividend income.
While the stock isn’t a screaming bargain, it’s not overpriced either. At these levels, it appears fairly valued for long-term investors.
Risks and Considerations
Every investment comes with risks, and Kroger is no exception. Here are a few factors to consider before investing:
🚨 Competitive Pressures: The grocery industry is highly competitive, with major players like Walmart, Amazon (Whole Foods), and Costco constantly vying for market share. Any aggressive pricing wars could put pressure on Kroger’s margins.
📉 Economic Slowdown: While groceries are an essential industry, economic downturns can still impact consumer spending habits. If inflation remains persistent, it could squeeze both consumers and Kroger’s profitability.
🏦 Debt Load: Kroger’s high debt levels mean that rising interest rates or changes in credit markets could have an impact on its financial flexibility.
📊 Stock Price Volatility: Although not as volatile as some sectors, Kroger’s stock does experience fluctuations, especially during earnings season.
💻 E-commerce Competition: Online grocery shopping is growing, and while Kroger has been investing in digital sales, it faces tough competition from companies with deeper pockets and stronger technological infrastructure.
While these risks are worth keeping in mind, Kroger’s scale, established brand, and strong operational efficiency put it in a solid position to navigate challenges.
Final Thoughts
For dividend investors, Kroger is a dependable choice that offers a blend of stability, income, and long-term growth. While its yield isn’t the highest, its consistent dividend growth, strong cash flow, and ability to perform well in different economic environments make it a compelling investment.
📈 Key Takeaways:
- Over 18 years of consecutive dividend growth
- Low payout ratio (33.24%), allowing room for future increases
- Strong cash flow ensures dividend safety despite high debt levels
- Stock price is near its 52-week high but still fairly valued
For those focused on growing their dividend income over time, Kroger presents a solid opportunity in the consumer staples sector. It may not be the highest-yielding option out there, but for investors looking for steady, reliable returns, it remains a strong contender.
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