It looks like Kontoor Brands, Inc. (NYSE:KTB) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 9th of December, you won't be eligible to receive this dividend, when it is paid on the 20th of December.
Kontoor Brands's next dividend payment will be US$0.56 per share, on the back of last year when the company paid a total of US$2.24 to shareholders. Based on the last year's worth of payments, Kontoor Brands has a trailing yield of 6.1% on the current stock price of $36.81. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Kontoor Brands can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kontoor Brands is paying out an acceptable 53% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 7.6% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously.
This is Kontoor Brands's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
Should investors buy Kontoor Brands for the upcoming dividend? It's unfortunate that earnings per share have not grown, and we'd note that Kontoor Brands is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. In summary, it's hard to get excited about Kontoor Brands from a dividend perspective.
Ever wonder what the future holds for Kontoor Brands? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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