Kimball International (NASDAQ:KBAL) Will Pay A Dividend Of $0.09

Kimball International, Inc. (NASDAQ:KBAL) has announced that it will pay a dividend of $0.09 per share on the 14th of April. Based on this payment, the dividend yield on the company's stock will be 5.0%, which is an attractive boost to shareholder returns.

See our latest analysis for Kimball International

Kimball International Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even in the absence of profits, Kimball International is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

The next 12 months is set to see EPS grow by 148.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 154%, which is a bit high and could start applying pressure to the balance sheet.

Kimball International Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.20 in 2013 to the most recent total annual payment of $0.36. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Kimball International's EPS has declined at around 47% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Kimball International's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Kimball International 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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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.