Kaiser Aluminum (NASDAQ:KALU) Has Affirmed Its Dividend Of $0.77

The board of Kaiser Aluminum Corporation (NASDAQ:KALU) has announced that it will pay a dividend on the 15th of February, with investors receiving $0.77 per share. The dividend yield will be 3.5% based on this payment which is still above the industry average.

View our latest analysis for Kaiser Aluminum

Kaiser Aluminum's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even in the absence of profits, Kaiser Aluminum is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along the path it has been on, the payout ratio could get to 88% which is certainly still sustainable.

Kaiser Aluminum Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $1.00, compared to the most recent full-year payment of $3.08. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 45% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 Kaiser Aluminum that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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