KAL Group (JSE:KAL) Will Pay A Dividend Of ZAR1.26

KAL Group Limited's (JSE:KAL) investors are due to receive a payment of ZAR1.26 per share on 17th of February. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

View our latest analysis for KAL Group

KAL Group's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, KAL Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 7.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

KAL Group's Dividend Has Lacked Consistency

It's comforting to see that KAL Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from ZAR0.826 total annually to ZAR1.80. This means that it has been growing its distributions at 12% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

KAL Group Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. KAL Group has impressed us by growing EPS at 7.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Even though the dividend was cut this year, we think KAL Group has the ability to make consistent payments in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 2 warning signs for KAL Group that investors need to be conscious of moving forward. Is KAL Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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