In This Article:
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kimco Realty Corporation (NYSE:KIM) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 1st of October in order to receive the dividend, which the company will pay on the 15th of October.
Kimco Realty's next dividend payment will be US$0.3 per share. Last year, in total, the company distributed US$1.1 to shareholders. Last year's total dividend payments show that Kimco Realty has a trailing yield of 5.4% on the current share price of $20.78. If you buy this business for its dividend, you should have an idea of whether Kimco Realty's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Kimco Realty
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. It paid out 87% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. While Kimco Realty seems to be paying out a very high percentage of its income, REITs have different dividend payment behaviour and so, while we don't think this is great, we also don't think it is unusual. A useful secondary check can be to evaluate whether Kimco Realty generated enough free cash flow to afford its dividend. It paid out 88% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Kimco Realty, with earnings per share up 7.8% on average over the last five years. Decent historical earnings per share growth suggests Kimco Realty has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.