Here's Why We're Wary Of Buying Kemper's (NYSE:KMPR) For Its Upcoming Dividend

By
Simply Wall St
Published
May 08, 2022
NYSE:KMPR
Source: Shutterstock

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kemper Corporation (NYSE:KMPR) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Kemper's shares on or after the 13th of May, you won't be eligible to receive the dividend, when it is paid on the 31st of May.

The company's upcoming dividend is US$0.31 a share, following on from the last 12 months, when the company distributed a total of US$1.24 per share to shareholders. Calculating the last year's worth of payments shows that Kemper has a trailing yield of 2.5% on the current share price of $48.7. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Kemper has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Kemper

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Kemper paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:KMPR Historic Dividend May 8th 2022

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Kemper reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kemper has delivered an average of 2.6% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Get our latest analysis on Kemper's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Kemper? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Kemper. Case in point: We've spotted 1 warning sign for Kemper you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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