Kimball International, Inc. (NASDAQ: KBAL) has announced that it will pay a dividend of $ 0.09 per share on October 15. Based on this payment, the dividend yield on the shares of the company will be 3.1%, which is an attractive increase in returns for shareholders.

Kimball International does not earn enough to cover payments

We like to see robust dividend yields, but it doesn’t matter if the payout isn’t sustainable. Before this announcement, the company paid out 179% of what it earned. It will be difficult to maintain this level of payment, so we would not be confident that this situation will continue.

Over the next year, EPS is expected to increase by 71.7%. However, if the dividend continues to grow according to recent trends, it could start to put pressure on the balance sheet, with the payout ratio reaching 115% over the next year.

NasdaqGS: KBAL Historic dividend September 17, 2021

Kimball International has a strong track record

The company has been paying a dividend for a long time, and it’s fairly stable, which gives us confidence in the future dividend potential. Since 2011, the dividend has increased from US $ 0.20 to US $ 0.36. This means that he increased his distributions by 6.1% per year during that period. Dividends have grown at a reasonable rate over this time period, and without a major reduction in payouts over time, we think this is an attractive combination as it provides a good boost to shareholder returns. .

The potential for dividend growth is fragile

Investors might be attracted to the stock depending on the quality of its payment history. However, initial appearances can be deceptive. Over the past five years, it appears that Kimball International’s EPS has declined by around 19% per year. This sharp drop may indicate that the company is going through a difficult time, which could limit its ability to pay a larger dividend each year in the future. On the bright side, earnings should gain ground over the next year or so, but until that turns into a trend, we wouldn’t feel too comfortable.

Kimball International’s dividend does not appear sustainable

Overall, it’s nice to see a consistent dividend payout, but we believe in the longer term the current payout level could be unsustainable. Although they have been constant in the past, we think the payouts are a bit high to be sustained. This company is not in the top bracket of income providing stocks.

Investors generally tend to favor companies with a consistent and stable dividend policy over those that operate irregularly. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. For example, we have selected 3 warning signs for Kimball International that investors should consider. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.

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