Interested In K-Bro Linen's (TSE:KBL) Upcoming CA$0.10 Dividend? You Have Four Days Left
K-Bro Linen Inc. (TSE:KBL) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase K-Bro Linen's shares before the 28th of December to receive the dividend, which will be paid on the 15th of January.
The company's next dividend payment will be CA$0.10 per share, on the back of last year when the company paid a total of CA$1.20 to shareholders. Looking at the last 12 months of distributions, K-Bro Linen has a trailing yield of approximately 3.8% on its current stock price of CA$31.9. If you buy this business for its dividend, you should have an idea of whether K-Bro Linen's dividend is reliable and sustainable. As a result, readers should always check whether K-Bro Linen has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for K-Bro Linen
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. K-Bro Linen paid out 94% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether K-Bro Linen generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while K-Bro Linen's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
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. Fortunately for readers, K-Bro Linen's earnings per share have been growing at 15% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. K-Bro Linen's dividend payments are broadly unchanged compared to where they were 10 years ago.
The Bottom Line
From a dividend perspective, should investors buy or avoid K-Bro Linen? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. Overall, it's hard to get excited about K-Bro Linen from a dividend perspective.
If you're not too concerned about K-Bro Linen's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 2 warning signs for K-Bro Linen that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
