Keller Group's (LON:KLR) Upcoming Dividend Will Be Larger Than Last Year's

Keller Group plc's (LON:KLR) dividend will be increasing from last year's payment of the same period to £0.245 on 23rd of June. This will take the dividend yield to an attractive 5.3%, providing a nice boost to shareholder returns.

See our latest analysis for Keller Group

Keller Group's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Keller Group's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 80.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Keller Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.228 in 2013, and the most recent fiscal year payment was £0.377. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Earnings per share has been sinking by 12% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Our Thoughts On Keller Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Keller Group is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 5 warning signs for Keller Group (of which 1 is a bit unpleasant!) you should know about. 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.