K&S (ASX:KSC) Has Affirmed Its Dividend Of A$0.10

K&S Corporation Limited's (ASX:KSC) investors are due to receive a payment of A$0.10 per share on 3rd of April. The dividend yield will be 6.1% based on this payment which is still above the industry average.

Check out our latest analysis for K&S

K&S' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, K&S' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 675% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 4.3% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 86% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of A$0.11 in 2014 to the most recent total annual payment of A$0.18. This means that it has been growing its distributions at 5.0% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

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. However, K&S has only grown its earnings per share at 4.3% per annum over the past five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

K&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 K&S' payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

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. As an example, we've identified 1 warning sign for K&S 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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