The board of Kronos Worldwide, Inc. (NYSE:KRO) has announced that it will pay a dividend on the 16th of September, with investors receiving US$0.18 per share. This makes the dividend yield 5.5%, which will augment investor returns quite nicely.

Check out our latest analysis for Kronos Worldwide

Kronos Worldwide Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the dividend made up 80% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

If the company can't turn things around, EPS could fall by 11.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 153%, which could put the dividend in jeopardy if the company's earnings don't improve.

Kronos Worldwide Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from US$0.50 in 2011 to the most recent annual payment of US$0.72. This means that it has been growing its distributions at 3.7% per annum over that time. 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. However, things aren't all that rosy. Kronos Worldwide's earnings per share has shrunk at 11% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Kronos Worldwide's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kronos Worldwide's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Kronos Worldwide that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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. 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.

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