Kingfisher (LON:KGF) Has Announced A Dividend Of £0.086

Kingfisher plc's (LON:KGF) investors are due to receive a payment of £0.086 per share on 30th of June. Based on this payment, the dividend yield on the company's stock will be 6.5%, which is an attractive boost to shareholder returns.

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Kingfisher's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Kingfisher's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 39% which is fairly sustainable.

See our latest analysis for Kingfisher

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from £0.099 total annually to £0.162. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Kingfisher might have put its house in order since then, but we remain cautious.

Dividend Growth Could Be Constrained

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. Kingfisher has impressed us by growing EPS at 94% per year over the past five years. EPS has been growing well, but Kingfisher has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Kingfisher that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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