Kelly Services (NASDAQ:KELY.A) Is Paying Out A Dividend Of $0.075

Kelly Services, Inc.'s (NASDAQ:KELY.A) investors are due to receive a payment of $0.075 per share on 6th of June. This means the dividend yield will be fairly typical at 1.6%.

View our latest analysis for Kelly Services

Kelly Services' Distributions May Be Difficult To Sustain

Solid dividend yields are great, but they only really help us if the payment is sustainable. Even in the absence of profits, Kelly Services is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share is forecast to rise by 93.5% over the next year. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $0.20 in 2013, and the most recent fiscal year payment was $0.30. This means that it has been growing its distributions at 4.1% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Kelly Services' EPS has declined at around 7.0% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Kelly Services' Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Kelly Services make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 3 analysts we track are forecasting for the future. Is Kelly Services not quite the opportunity you were looking for? Why not check out our selection of top 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.