Kronos Worldwide (NYSE:KRO) Will Pay A Dividend Of $0.19

The board of Kronos Worldwide, Inc. (NYSE:KRO) has announced that it will pay a dividend of $0.19 per share on the 14th of September. This means the annual payment is 9.2% of the current stock price, which is above the average for the industry.

See our latest analysis for Kronos Worldwide

Kronos Worldwide's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Kronos Worldwide is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS might fall by 21.9% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Kronos Worldwide Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.60 total annually to $0.76. This implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Kronos Worldwide's EPS has fallen by approximately 22% per year during the past 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.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kronos Worldwide's payments, as there could be some issues with sustaining them into the future. 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.

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. For instance, we've picked out 2 warning signs for Kronos Worldwide that investors should take into consideration. 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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