The landscape of dividend growth in the corporate arena typically sees its strongest performance in the first quarter of the year. This trend is largely due to many companies concluding their fiscal year and gearing up for their annual shareholder meetings. For the first quarter of 2025, although growth was noticeably slower, it did align with expectations considering the ongoing economic uncertainties. These uncertainties may have tempered the increases, yet they did not halt them entirely, as evidenced by the cautious approach observed in forward commitment levels.

Howard Silverblatt, a Senior Index Analyst at S&P Dow Jones Indices, conveyed a sense of cautious optimism regarding the overall outlook for dividends. He acknowledged the existing market conditions that introduce a level of uncertainty but maintained a positive stance on the potential for continued dividend growth.

According to additional data released by S&P Dow Jones Indices, a total of 758 companies either raised or initiated dividend payments in the first quarter of 2025. This figure represents a slight decline from the 796 companies that made similar moves during the same period last year, translating to a 4.8% year-over-year drop. Despite this decline in the number of companies increasing dividends, the total monetary value of these increases reached a substantial $19.5 billion for the quarter. Over the 12-month period ending March 2025, 2,412 companies raised their dividend payments, marking a slight increase from the previous year's count of 2,411. The total value of these dividend increases for the year was $68.2 billion, just edging past the $68.1 billion recorded during the prior year.

The report further highlighted that overall dividend payments experienced a rise of approximately 6% to 7%. This growth, however, fell short of the pre-2025 expectation of 8%. In contrast, dividend payouts had previously risen by 6.4% in 2024 and 5.1% in 2023, demonstrating a trend of steady, albeit slower, growth.

Data from S&P Dow Jones Indices also revealed that U.S. domestic common stocks recorded a net dividend increase of $15.3 billion in the first quarter of 2025, representing a notable improvement over the $11.7 billion increase seen in the preceding quarter. Over the year ending March 2025, the total dividend hikes reached $68.2 billion, marginally surpassing the $68.1 billion reported in the previous twelve months. Meanwhile, the total amount of dividend cuts significantly declined, totaling $15.6 billion compared to $25.2 billion in the prior twelve-month period.

The sustained popularity of dividend-paying stocks among investors can be attributed to their impressive historical performance. This ongoing interest has catalyzed many companies to maintain their dividend payouts, increase them, or even implement new dividend policies altogether.

In a recent publication, we highlighted a list of the ten dividend stocks noted for their sustainable payout ratios. In this article, we will delve into how The Kroger Co. (NYSE:KR) compares with other top dividend stocks that boast sustainable payout ratios.

Despite some reservations, analysts remain optimistic about dividend stocks, emphasizing that U.S. companies are strategically positioned to uphold their payouts, primarily due to robust cash reserves. Nuveen, a financial planning firm based in Illinois, pointed out that the current cash-rich environment is likely to encourage a growing number of companies to introduce or enhance their dividend policies, potentially leading to dividend growth that exceeds expectations in 2025.

According to the report, as of September 30, 2024, corporate cash holdings were recorded at an impressive $1.8 trillion, nearing the highest levels seen in the last two decades. Given that equity valuations are currently above historical averages, Nuveen posited that companies might prefer to increase dividend payouts as a means of delivering value to shareholders instead of relying on stock buybacks, which may be less appealing in this inflated valuation climate.

Financial analysts typically regard a payout ratio between 30% and 50% as optimal. Such a ratio indicates that a company is returning a significant portion of its earnings to shareholders while still retaining enough profits for reinvestment into the business to support ongoing growth.

The Kroger Co. (KR) stands out as one of the dividend stocks with sustainable payout ratios. This American retail giant operates a vast network of supermarkets and multi-department stores across the United States. In fiscal Q4 2025, Kroger reported revenue of $34.3 billion, reflecting a 7% year-over-year decline, which fell short of analysts expectations of $34.7 billion. Furthermore, the company saw its operating profit decline by over 27% compared to the same period the previous year.

On a more positive note, Krogers Alternative Profit Businesses, which encompass advertising and data services, generated an impressive $1.35 billion in operating profit, buoyed by a 17% increase in media-related revenue. Moreover, digital sales grew by 11%, showcasing the company's ongoing commitment to enhancing the customer experience. In an effort to bolster its private-label offerings, Kroger launched over 900 new products under its Our Brands label, which has the potential to strengthen profitability further.

Maintaining a solid cash position has solidified Krogers reputation as a reliable dividend payer. In fiscal year 2024, the company generated $5.8 billion in operating cash flow and returned $883 million to shareholders through dividend payments. The companys strong cash reserves have resulted in a low payout ratio of nearly 33% over the past five years. As of April 17, Kroger pays a quarterly dividend of $0.32 per share, yielding 1.8%. Impressively, the company has maintained an 18-year streak of consistent dividend growth.

In summary, Kroger ranks fifth on our list of the best dividend stocks with sustainable payout ratios. Although we recognize the potential of Kroger as a sound investment, we believe that certain undervalued dividend stocks may offer greater promise for higher returns within a shorter time frame. For those interested in discovering a deeply undervalued dividend stock that trades at 10 times its earnings and boasts double-digit annual earnings growth, we recommend checking our report on promising investment opportunities.

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Disclosure: None. This article was originally published by Insider Monkey.