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Kennedy-Wilson Holdings, Inc. (NYSE:KW) has announced that it will pay a dividend of $0.12 per share on the 3rd of July. This makes the dividend yield 7.8%, which will augment investor returns quite nicely.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Kennedy-Wilson Holdings' stock price has reduced by 31% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
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Kennedy-Wilson Holdings Might Find It Hard To Continue The Dividend
If the payments aren't sustainable, a high yield for a few years won't matter that much. Kennedy-Wilson Holdings isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. These payout levels would generally be quite difficult to keep up.
Over the next year, EPS is forecast to expand by 14.3%. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.
See our latest analysis for Kennedy-Wilson Holdings
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.36 in 2015, and the most recent fiscal year payment was $0.48. This means that it has been growing its distributions at 2.9% 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.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Kennedy-Wilson Holdings' earnings per share has shrunk at 58% 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.
We're Not Big Fans Of Kennedy-Wilson Holdings' Dividend
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Kennedy-Wilson Holdings make more consistent payments in the future. 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. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.