Kingfisher (LON:KGF) Is Paying Out A Dividend Of £0.086

The board of Kingfisher plc (LON:KGF) has announced that it will pay a dividend on the 30th of June, with investors receiving £0.086 per share. This means the annual payment is 4.6% of the current stock price, which is above the average for the industry.

Our free stock report includes 3 warning signs investors should be aware of before investing in Kingfisher. Read for free now.

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. Based on the last payment, Kingfisher's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 40% which is fairly sustainable.

View our latest analysis for Kingfisher

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 2015, the dividend has gone from £0.099 total annually to £0.124. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Kingfisher's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Kingfisher has grown earnings per share at 94% per year over the past five years. While EPS is growing rapidly, Kingfisher paid out a very high 123% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

Our Thoughts On Kingfisher's Dividend

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 don't think Kingfisher is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for Kingfisher 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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