KB Home (NYSE:KBH) Has Announced A Dividend Of US$0.15

The board of KB Home (NYSE:KBH) has announced that it will pay a dividend of US$0.15 per share on the 24th of November. This payment means that the dividend yield will be 1.5%, which is around the industry average.

See our latest analysis for KB Home

KB Home's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. KB Home is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 35.2%. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

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Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the dividend has gone from US$0.25 to US$0.60. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. KB Home has seen EPS rising for the last five years, at 35% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While KB Home is earning enough to cover the payments, the cash flows are lacking. We don't think KB Home is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for KB Home (1 is potentially serious!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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.

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