KB Home (NYSE:KBH) Is Paying Out A Dividend Of $0.25

KB Home (NYSE:KBH) will pay a dividend of $0.25 on the 21st of August. This payment means that the dividend yield will be 1.8%, which is around the industry average.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

KB Home's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, KB Home was paying only paying out a fraction of earnings, but the payment was a massive 105% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 22.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Check out our latest analysis for KB Home

KB Home Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.10 in 2015 to the most recent total annual payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that KB Home has grown earnings per share at 20% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On KB Home's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While KB Home is earning enough to cover the payments, the cash flows are lacking. We don't think KB Home is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for KB Home (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.