Yahoo Finance KP Tissue (TSE:KPT) Has Announced A Dividend Of CA$0.18
KP Tissue Inc. (TSE:KPT) has announced that it will pay a dividend of CA$0.18 per share on the 15th of January. This makes the dividend yield 8.0%, which will augment investor returns quite nicely.
Check out our latest analysis for KP Tissue
KP Tissue's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. While KP Tissue is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, so there isn't too much pressure on the dividend.
KP Tissue 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. The last annual payment of CA$0.72 was flat on the annual payment from10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. KP Tissue's earnings per share has shrunk at 36% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about KP Tissue's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think KP Tissue is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for KP Tissue (1 makes us a bit uncomfortable!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
