Kronos Worldwide (NYSE:KRO) Will Pay A Dividend Of US$0.18

Kronos Worldwide, Inc.'s (NYSE:KRO) investors are due to receive a payment of US$0.18 per share on 16th of September. The dividend yield will be 5.5% based on this payment which is still above the industry average.

See our latest analysis for Kronos Worldwide

Kronos Worldwide Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 131% of what it was earning and 80% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

If the company can't turn things around, EPS could fall by 11.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 153%, which could put the dividend under pressure if earnings don't start to improve.

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. Since 2011, the dividend has gone from US$0.50 to US$0.72. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. 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.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Kronos Worldwide's EPS has fallen by approximately 11% 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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for Kronos Worldwide that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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