Kering's (EPA:KER) Dividend Will Be €4.50

Kering SA (EPA:KER) has announced that it will pay a dividend of €4.50 per share on the 17th of January. This makes the dividend yield 3.4%, which will augment investor returns quite nicely.

View our latest analysis for Kering

Kering's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. But before making this announcement, Kering's earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS is forecast to expand by 18.8%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from €3.00 total annually to €14.00. This means that it has been growing its distributions at 17% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Kering has seen EPS rising for the last five years, at 11% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

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. While Kering is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Kering that investors need to be conscious of moving forward. 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.