K-Bro Linen (TSE:KBL) Has Affirmed Its Dividend Of CA$0.10

The board of K-Bro Linen Inc. (TSE:KBL) has announced that it will pay a dividend of CA$0.10 per share on the 15th of May. The dividend yield will be 3.3% based on this payment which is still above the industry average.

View our latest analysis for K-Bro Linen

K-Bro Linen's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, K-Bro Linen's dividend made up quite a large proportion of earnings but only 43% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 98.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

K-Bro Linen Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from CA$1.15 total annually to CA$1.20. Dividend payments have been growing, but very slowly over the period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. K-Bro Linen has impressed us by growing EPS at 23% per year over the past five years. However, K-Bro Linen isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

K-Bro Linen Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for K-Bro Linen for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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