Kier Group (LON:KIE) Has Announced A Dividend Of £0.02

The board of Kier Group plc (LON:KIE) has announced that it will pay a dividend of £0.02 per share on the 2nd of June. This takes the annual payment to 4.2% of the current stock price, which is about average for the industry.

Check out our latest analysis for Kier Group

Kier Group's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Kier Group's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 77.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.72 in 2015 to the most recent total annual payment of £0.0515. Dividend payments have fallen sharply, down 93% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. We are encouraged to see that Kier Group has grown earnings per share at 78% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Kier Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Kier Group that investors should know about before committing capital to this stock. 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.