Yahoo Finance Why You Might Be Interested In Kingfisher plc (LON:KGF) For Its Upcoming Dividend
It looks like Kingfisher plc (LON:KGF) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Kingfisher's shares before the 16th of May in order to receive the dividend, which the company will pay on the 25th of June.
The company's next dividend payment will be UK£0.086 per share. Last year, in total, the company distributed UK£0.12 to shareholders. Based on the last year's worth of payments, Kingfisher stock has a trailing yield of around 4.7% on the current share price of UK£2.616. 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! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Kingfisher
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kingfisher paid out 68% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Kingfisher generated enough free cash flow to afford its dividend. Luckily it paid out just 25% of its free cash flow last year.
It's positive to see that Kingfisher's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Kingfisher's earnings per share have been growing at 15% a year for the past five years. Kingfisher is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kingfisher has delivered 2.3% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Final Takeaway
Is Kingfisher worth buying for its dividend? We like Kingfisher's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Kingfisher, and we would prioritise taking a closer look at it.
In light of that, while Kingfisher has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Kingfisher that we recommend you consider before investing in the business.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
