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The board of Kendrion N.V. (AMS:KENDR) has announced that it will be paying its dividend of €0.72 on the 11th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 4.7%, which shareholders will be pleased with.
See our latest analysis for Kendrion
Kendrion's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Kendrion isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.
Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 7.5%, so there isn't too much pressure on the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €0.58 in 2013, and the most recent fiscal year payment was €0.72. This means that it has been growing its distributions at 2.2% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Kendrion's EPS has fallen by approximately 33% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
We're Not Big Fans Of Kendrion's Dividend
In conclusion, we have some concerns about this dividend, even though it being raised is good. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Kendrion (of which 1 can't be ignored!) you should know about. Is Kendrion not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.