KP Tissue (TSE:KPT) Has Re-Affirmed Its Dividend Of CA$0.18

The board of KP Tissue Inc. (TSE:KPT) has announced that it will pay a dividend on the 17th of January, with investors receiving CA$0.18 per share. Based on this payment, the dividend yield on the company's stock will be 6.8%, which is an attractive boost to shareholder returns.

Check out our latest analysis for KP Tissue

KP Tissue's Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. KP Tissue is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share could rise by 31.9% over the next year if the trend from the last few years continues. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

KP Tissue Is Still Building Its Track Record

KP Tissue's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The payments haven't really changed that much since 9 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see KP Tissue has been growing its earnings per share at 32% a year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about KP Tissue's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think KP Tissue is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for KP Tissue you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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