Kina Securities (ASX:KSL) Is Due To Pay A Dividend Of AU$0.04

The board of Kina Securities Limited ( ASX:KSL ) has announced that it will pay a dividend of AU$0.04 per share on the 4th of October. Based on this payment, the dividend yield on the company's stock will be 9.4%, which is an attractive boost to shareholder returns.

View our latest analysis for Kina Securities

Kina Securities' Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Kina Securities has a good history of paying out dividends, with its current track record at 9 years. Past distributions do not necessarily guarantee future ones, but Kina Securities' payout ratio of 73% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 51.6%. The future payout ratio could be 69% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Kina Securities' Dividend Has Lacked Consistency

Looking back, Kina Securities' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was AU$0.0737 in 2015, and the most recent fiscal year payment was AU$0.256. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.4% per annum over the last five years, which admittedly is a bit slow. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Our Thoughts On Kina Securities' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Kina Securities that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.