Yahoo Finance Here's What We Like About K-Bro Linen's (TSE:KBL) Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that K-Bro Linen Inc. (TSE:KBL) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase K-Bro Linen's shares on or after the 29th of April, you won't be eligible to receive the dividend, when it is paid on the 15th of May.
The company's next dividend payment will be CA$0.10 per share. Last year, in total, the company distributed CA$1.20 to shareholders. Looking at the last 12 months of distributions, K-Bro Linen has a trailing yield of approximately 3.5% on its current stock price of CA$34.75. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for K-Bro Linen
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. K-Bro Linen is paying out an acceptable 73% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 44% of its free cash flow in the past year.
It's positive to see that K-Bro Linen's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see K-Bro Linen has grown its earnings rapidly, up 23% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. K-Bro Linen's dividend payments are effectively flat on where they were 10 years ago.
Final Takeaway
From a dividend perspective, should investors buy or avoid K-Bro Linen? We like K-Bro Linen's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. K-Bro Linen looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of K-Bro Linen? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
