Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kemper Corporation (NYSE:KMPR) is about to go ex-dividend in just four days. Ex-dividend means that investors that purchase the stock on or after the 13th of November will not receive this dividend, which will be paid on the 2nd of December.
Kemper's next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$1.20 to shareholders. Based on the last year's worth of payments, Kemper stock has a trailing yield of around 1.9% on the current share price of $64.83. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Kemper is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Kemper's earnings have been skyrocketing, up 26% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Kemper has lifted its dividend by approximately 3.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Kemper is keeping back more of its profits to grow the business.
The Bottom Line
Is Kemper an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Kemper appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Kemper has 3 warning signs (and 1 which is concerning) we think you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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