Kennedy-Wilson Holdings' (NYSE:KW) Dividend Will Be Reduced To $0.12

Kennedy-Wilson Holdings, Inc. (NYSE:KW) has announced it will be reducing its dividend payable on the 5th of July to $0.12, which is 50% lower than what investors received last year for the same period. This means the annual payment is 9.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Kennedy-Wilson Holdings

Kennedy-Wilson Holdings Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Kennedy-Wilson Holdings is unprofitable despite paying a dividend, and it is paying out 120% of its free cash flow. This makes us feel that the dividend will be hard to maintain.

Looking forward, earnings per share is forecast to rise by 65.2% over the next year. This is the right direction to be moving, but it is not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Kennedy-Wilson Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.28 in 2014, and the most recent fiscal year payment was $0.96. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Kennedy-Wilson Holdings' EPS has fallen by approximately 34% per year during 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. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Kennedy-Wilson Holdings' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. Dividend payments have been pretty consistent for a while, but we do think the payout ratios are a little bit high. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 3 warning signs for Kennedy-Wilson Holdings that investors need to be conscious of moving forward. 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.