Here's What We Like About Kinross Gold's (TSE:K) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kinross Gold Corporation (TSE:K) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 2nd of March in order to be eligible for this dividend, which will be paid on the 18th of March.

Kinross Gold's next dividend payment will be US$0.03 per share. Last year, in total, the company distributed US$0.12 to shareholders. Looking at the last 12 months of distributions, Kinross Gold has a trailing yield of approximately 1.8% on its current stock price of CA$8.53. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Kinross Gold can afford its dividend, and if the dividend could grow.

View our latest analysis for Kinross Gold

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Kinross Gold has a low and conservative payout ratio of just 5.6% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 7.6% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Kinross Gold's earnings have been skyrocketing, up 74% per annum for the past five years. Kinross Gold earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Kinross Gold has lifted its dividend by approximately 1.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Kinross Gold is keeping back more of its profits to grow the business.

Final Takeaway

Is Kinross Gold worth buying for its dividend? Kinross Gold has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Kinross Gold for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Kinross Gold (including 1 which is significant).

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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