Stock Analysis

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

TSX:KBL
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K-Bro Linen Inc. (TSE:KBL) will pay a dividend of CA$0.10 on the 15th of April. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

View our latest analysis for K-Bro Linen

K-Bro Linen's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 94% of earnings, but cash flows were much higher. 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.

Looking forward, earnings per share is forecast to rise by 147.1% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 37% which would be quite comfortable going to take the dividend forward.

historic-dividend
TSX:KBL Historic Dividend March 21st 2024

K-Bro Linen Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$1.15 in 2014, and the most recent fiscal year payment was CA$1.20. Dividend payments have been growing, but very slowly over the period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

K-Bro Linen's Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. K-Bro Linen has impressed us by growing EPS at 28% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

In Summary

Overall, a consistent dividend is a good thing, and we think that K-Bro Linen has the ability to continue this into the future. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for K-Bro Linen that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.