Yahoo Finance Should Kid ASA (OB:KID) Be Part Of Your Dividend Portfolio?
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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Kid ASA (OB:KID) has paid a dividend to shareholders in the last few years. It currently yields 7.5%. Should it have a place in your portfolio? Let's take a look at Kid in more detail.
See our latest analysis for Kid
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is their annual yield among the top 25% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Does earnings amply cover its dividend payments?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Kid pass our checks?
The current trailing twelve-month payout ratio for the stock is 77%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect KID's payout to increase to 91% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 9.0%. However, EPS is forecasted to fall to NOK3.96 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Kid as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Kid has a yield of 7.5%, which is high for Specialty Retail stocks.
Next Steps:
Taking all the above into account, Kid is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three relevant aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for KID’s future growth? Take a look at our free research report of analyst consensus for KID’s outlook.
Valuation: What is KID worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether KID is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
