K-Bro Linen (TSE:KBL) Is Due To Pay A Dividend Of CA$0.10

K-Bro Linen Inc.'s (TSE:KBL) investors are due to receive a payment of CA$0.10 per share on 15th of January. Based on this payment, the dividend yield on the company's stock will be 3.1%, which is an attractive boost to shareholder returns.

Check out our latest analysis for K-Bro Linen

K-Bro Linen's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by K-Bro Linen's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 56.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

K-Bro Linen Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$1.15 in 2014 to the most recent total annual payment of CA$1.20. Dividend payments have grown at less than 1% a year over this period. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. K-Bro Linen has seen EPS rising for the last five years, at 14% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

K-Bro Linen Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think K-Bro Linen might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for K-Bro Linen that you should be aware of before investing. Is K-Bro Linen not quite the opportunity you were looking for? Why not check out our selection of top 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.