Kontoor Brands' (NYSE:KTB) Dividend Will Be Increased To $0.53

Kontoor Brands, Inc. (NYSE:KTB) will increase its dividend on the 18th of December to $0.53, which is 1.9% higher than last year's payment from the same period of $0.52. This makes the dividend yield 2.6%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Kontoor Brands' stock price has increased by 46% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Kontoor Brands' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Kontoor Brands' earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 45.1%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Kontoor Brands

Kontoor Brands' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the annual payment back then was $2.24, compared to the most recent full-year payment of $2.08. Doing the maths, this is a decline of about 1.2% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Kontoor Brands has been growing its earnings per share at 104% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Kontoor Brands Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Kontoor Brands is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income 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. For instance, we've picked out 2 warning signs for Kontoor Brands that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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