Kering (EPA:KER) Is Due To Pay A Dividend Of €9.50

Kering SA's (EPA:KER) investors are due to receive a payment of €9.50 per share on 6th of May. Based on this payment, the dividend yield on the company's stock will be 4.0%, which is an attractive boost to shareholder returns.

View our latest analysis for Kering

Kering's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Kering was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 15.9%. If the dividend continues on this path, the payout ratio could be 57% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from €3.75 total annually to €14.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Kering has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.2% per year. Kering is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kering's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Kering that investors need to be conscious of moving forward. 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.