Kingstone Companies (NASDAQ:KINS) Will Pay A Dividend Of US$0.04

The board of Kingstone Companies, Inc. (NASDAQ:KINS) has announced that it will pay a dividend on the 15th of December, with investors receiving US$0.04 per share. Based on this payment, the dividend yield on the company's stock will be 3.2%, which is an attractive boost to shareholder returns.

View our latest analysis for Kingstone Companies

Kingstone Companies' Distributions May Be Difficult To Sustain

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. While Kingstone Companies is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS is forecast to rise by 63.3%. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the dividend has gone from US$0.12 to US$0.16. This means that it has been growing its distributions at 2.9% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kingstone Companies' earnings per share has shrunk at 53% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Kingstone Companies that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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