Yahoo Finance K-Bro Linen (TSE:KBL) Has Announced A Dividend Of CA$0.10
K-Bro Linen Inc. (TSE:KBL) has announced that it will pay a dividend of CA$0.10 per share on the 15th of April. The dividend yield will be 3.5% based on this payment which is still above the industry average.
View our latest analysis for K-Bro Linen
K-Bro Linen's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, K-Bro Linen was paying out 94% of earnings, but a comparatively small 43% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, earnings per share is forecast to rise by 93.5% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 37% which brings it into quite a comfortable range.
K-Bro Linen Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from CA$1.15 total annually to CA$1.20. Dividend payments have grown at less than 1% a year over this period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
K-Bro Linen Might Find It Hard To Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. K-Bro Linen has impressed us by growing EPS at 23% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which K-Bro Linen hasn't been doing.
In Summary
Overall, a consistent dividend is a good thing, and we think that K-Bro Linen has the ability to continue this into the future. With a reasonable track record and good earnings coverage, the payments look sustainable. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for K-Bro Linen that you should be aware of before investing. Is K-Bro Linen not quite the opportunity you were looking for? Why not check out 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.
