Yahoo Finance Kennametal (NYSE:KMT) Is Due To Pay A Dividend Of $0.20
The board of Kennametal Inc. (NYSE:KMT) has announced that it will pay a dividend of $0.20 per share on the 28th of May. This means the annual payment is 3.2% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Kennametal
Kennametal'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. The last dividend was quite easily covered by Kennametal's earnings. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 15.3%. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.
Kennametal Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.72 in 2014, and the most recent fiscal year payment was $0.80. This implies that the company grew its distributions at a yearly rate of about 1.1% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Our Thoughts On Kennametal's Dividend
Overall, a consistent dividend is a good thing, and we think that Kennametal has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. 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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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.
