Stock Analysis

Why You Might Be Interested In Kelly Services, Inc. (NASDAQ:KELY.A) For Its Upcoming Dividend

NasdaqGS:KELY.A
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Readers hoping to buy Kelly Services, Inc. (NASDAQ:KELY.A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Kelly Services' shares on or after the 26th of February, you won't be eligible to receive the dividend, when it is paid on the 13th of March.

The company's next dividend payment will be US$0.075 per share, and in the last 12 months, the company paid a total of US$0.30 per share. Based on the last year's worth of payments, Kelly Services stock has a trailing yield of around 1.3% on the current share price of US$23.50. If you buy this business for its dividend, you should have an idea of whether Kelly Services's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Kelly Services

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Kelly Services paying out a modest 30% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NasdaqGS:KELY.A Historic Dividend February 21st 2024

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Kelly Services's earnings per share have been growing at 12% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kelly Services has delivered 4.1% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Kelly Services is keeping back more of its profits to grow the business.

To Sum It Up

Is Kelly Services an attractive dividend stock, or better left on the shelf? Kelly Services has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Kelly Services for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Kelly Services that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Valuation is complex, but we're here to simplify it.

Discover if Kelly Services might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.