Kaman (NYSE:KAMN) Has Announced A Dividend Of US$0.20

Kaman Corporation (NYSE:KAMN) will pay a dividend of US$0.20 on the 14th of October. This means the dividend yield will be fairly typical at 2.2%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Kaman's stock price has reduced by 33% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Kaman

Kaman Might Find It Hard To Continue The Dividend

We aren't too impressed by dividend yields unless they can be sustained over time. Even though Kaman isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Recent, EPS has fallen by 44.1%, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Kaman Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the first annual payment was US$0.56, compared to the most recent full-year payment of US$0.80. This means that it has been growing its distributions at 3.6% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Kaman's EPS has declined at around 44% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Kaman's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kaman's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Kaman is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Kaman 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 performing dividend stock.

If you decide to trade Kaman, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.