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It looks like Kimco Realty Corporation (NYSE:KIM) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 1st of July to receive the dividend, which will be paid on the 15th of July.
Kimco Realty’s next dividend payment will be US$0.28 per share. Last year, in total, the company distributed US$1.12 to shareholders. Based on the last year’s worth of payments, Kimco Realty stock has a trailing yield of around 6.2% on the current share price of $18.15. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Its dividend payout ratio is 86% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether Kimco Realty generated enough free cash flow to afford its dividend. It paid out 89% of its free cash flow as dividends, which is within usual limits but will limit the company’s ability to lift the dividend if there’s no growth.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Kimco Realty’s earnings per share have been growing at 12% a year for the past five years.
The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We’re surprised that management has not elected to reinvest more in the business to accelerate growth further.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Kimco Realty has seen its dividend decline 4.4% per annum on average over the past 10 years, which is not great to see. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Is Kimco Realty worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we’d also note that Kimco Realty is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it’s hard to get excited about Kimco Realty from a dividend perspective.
Ever wonder what the future holds for Kimco Realty? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.