Have you been keeping an eye on KBR Inc’s (NYSE:KBR) upcoming dividend of US$0.08 per share payable on the 15 January 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 14 December 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding KBR can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does KBR pass our checks?
The company currently pays out 8.8% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect KBR’s payout to increase to 16% of its earnings, which leads to a dividend yield of around 1.8%. However, EPS is forecasted to fall to $1.75 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. KBR has increased its DPS from $0.20 to $0.32 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, KBR produces a yield of 1.8%, which is high for Construction stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank KBR as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for KBR’s future growth? Take a look at our free research report of analyst consensus for KBR’s outlook.
- Valuation: What is KBR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether KBR is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.