Kimball International (NASDAQ:KBAL) Has Affirmed Its Dividend Of US$0.09

The board of Kimball International, Inc. (NASDAQ:KBAL) has announced that it will pay a dividend of US$0.09 per share on the 15th of October. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

See our latest analysis for Kimball International

Kimball International Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 71.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 115%, which probably can't continue putting some pressure on the balance sheet.

Kimball International Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from US$0.20 to US$0.36. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Over the past five years, it looks as though Kimball International's EPS has declined at around 19% a year. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Kimball International's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kimball International's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for Kimball International that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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