KB Home's (NYSE:KBH) Shareholders Will Receive A Bigger Dividend Than Last Year

KB Home's (NYSE:KBH) dividend will be increasing from last year's payment of the same period to $0.20 on 22nd of November. Based on this payment, the dividend yield for the company will be 1.6%, which is fairly typical for the industry.

View our latest analysis for KB Home

KB Home's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, KB Home's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 7.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 11%, which is comfortable for the company to continue in the future.

KB Home Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.10 total annually to $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 23% 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. It's encouraging to see that KB Home has been growing its earnings per share at 36% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

KB Home Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. To that end, KB Home has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is KB Home 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.