Kronos Worldwide (NYSE:KRO) Has Announced A Dividend Of $0.19

Kronos Worldwide, Inc. (NYSE:KRO) will pay a dividend of $0.19 on the 15th of June. This makes the dividend yield 9.0%, which will augment investor returns quite nicely.

View our latest analysis for Kronos Worldwide

Kronos Worldwide Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the dividend made up 276% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

If the company can't turn things around, EPS could fall by 39.3% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 471%, which is definitely a bit high to be sustainable going forward.

Kronos Worldwide Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.60 in 2013 to the most recent total annual payment of $0.76. This implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Kronos Worldwide's EPS has declined at around 39% a year. 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.

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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Kronos Worldwide you should be aware of, and 2 of them are concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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