KP Tissue (TSE:KPT) Is Due To Pay A 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 April, with investors receiving CA$0.18 per share. This means the annual payment is 7.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for KP Tissue

KP Tissue's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though KP Tissue isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 5.6%, so there isn't too much pressure on the dividend.

KP Tissue Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The payments haven't really changed that much since 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See KP Tissue's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that KP Tissue has been growing its earnings per share at 7.5% a year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. 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. For example, we've identified 3 warning signs for KP Tissue (1 is a bit concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.