Is Nestlé S.A. (NSRGY) The Best Annual Dividend Stock To Buy Now?
Monday, Feb 10, 2025 2:05 pm ET
4min read Nestlé S.A. (NSRGY), the world's largest food and beverage company, has long been a favorite among income-seeking investors due to its consistent and growing dividend payouts. As of February 2025, Nestlé's annual dividend stands at $3.30 per share, with a yield of 3.88%. But is Nestlé the best annual dividend stock to buy now? Let's examine the company's dividend history, yield, and payout ratio, as well as its earnings and free cash flow growth prospects, to determine if Nestlé is the right choice for your portfolio.
Nestlé's dividend history is marked by consistent growth and stability. The company has increased its annual dividend every year since 2020, with a compound annual growth rate (CAGR) of approximately 19.2% over this period. This consistent dividend growth, combined with a stable payout ratio, has made Nestlé an attractive choice for income investors.
When compared to its industry peers, Nestlé's dividend yield is competitive. As of February 2025, Nestlé's dividend yield of 3.88% is higher than the average dividend yield of 2.74% over the last ten years. While some companies in the consumer defensive sector, such as Conagra Brands (5.71%) and The Kraft Heinz Company (5.54%), offer higher dividend yields, Nestlé's yield is still attractive and supported by a strong financial performance.
Nestlé's earnings per share (EPS) are expected to grow from 4.72 in the current year to 5.51 in the following year, indicating a growth rate of approximately 16.7%. This expected growth in EPS suggests that Nestlé's earnings are likely to increase, which could support the company's ability to maintain or even increase its dividend payouts in the future.
Additionally, Nestlé's free cash flow (FCF) is expected to grow at a similar rate. The company's FCF for the current year is 9.71 billion, and while the exact growth rate is not provided, the company's strong financial performance and consistent dividend payouts suggest that FCF growth is likely to be positive.
Nestlé's ability to maintain or increase its dividend payouts in the future will depend on its earnings and FCF growth, as well as its payout ratio. The company's current payout ratio is 69.76%, which means that it pays out a significant portion of its earnings as dividends. If Nestlé's earnings and FCF continue to grow, the company may be able to maintain or even increase its dividend payouts without significantly increasing its payout ratio.
In conclusion, Nestlé S.A. (NSRGY) is an attractive annual dividend stock with a history of consistent dividend growth and a competitive dividend yield. The company's strong financial performance and expected earnings and FCF growth suggest that Nestlé is well-positioned to maintain or even increase its dividend payouts in the future. However, investors should also consider the company's payout ratio and the sustainability of its dividend payouts in the long term. Nestlé's strong financial position and consistent dividend history indicate that its dividend payouts are likely to be sustainable in the long term, making it an attractive choice for income-seeking investors.
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