Kaiser Aluminum (NASDAQ:KALU) Is Due To Pay A Dividend Of $0.77

Kaiser Aluminum Corporation (NASDAQ:KALU) will pay a dividend of $0.77 on the 14th of February. This makes the dividend yield 4.2%, which will augment investor returns quite nicely.

See our latest analysis for Kaiser Aluminum

Kaiser Aluminum's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to fall by 13.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 129%, which could put the dividend in jeopardy if the company's earnings don't improve.

Kaiser Aluminum Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.40 in 2015, and the most recent fiscal year payment was $3.08. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Kaiser Aluminum's earnings per share has shrunk at 13% 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.

Kaiser Aluminum's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 3 warning signs for Kaiser Aluminum (of which 2 are a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.