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 December. This means the annual payment is 5.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Kronos Worldwide

Kronos Worldwide Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 131% of what it was earning and 80% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

EPS is set to fall by 11.5% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 154%, which could put the dividend under pressure if earnings don't start to improve.

Kronos Worldwide Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from US$0.50 in 2011 to the most recent annual payment of US$0.72. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. 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

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Kronos Worldwide's earnings per share has shrunk at 11% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Kronos Worldwide's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Kronos Worldwide is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Kronos Worldwide that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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