Kontoor Brands (NYSE:KTB) Is Increasing Its Dividend To $0.52

Kontoor Brands, Inc. (NYSE:KTB) will increase its dividend on the 19th of December to $0.52, which is 4.0% higher than last year's payment from the same period of $0.50. This takes the dividend yield to 2.6%, which shareholders will be pleased with.

Check out our latest analysis for Kontoor Brands

Kontoor Brands' Future Dividend Projections Appear Well Covered By Earnings

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 indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 29.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Kontoor Brands' Dividend Has Lacked Consistency

It's comforting to see that Kontoor Brands has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from $2.24 total annually to $2.00. Doing the maths, this is a decline of about 2.2% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Kontoor Brands Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Kontoor Brands has grown earnings per share at 6.7% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. As an example, we've identified 2 warning signs for Kontoor Brands that you should be aware of before investing. Is Kontoor Brands 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.