The board of Kelly Services, Inc. (NASDAQ:KELY.A) has announced that it will pay a dividend of $0.075 per share on the 3rd of June. This means the annual payment is 2.5% of the current stock price, which is above the average for the industry.
Our free stock report includes 1 warning sign investors should be aware of before investing in Kelly Services. Read for free now.Kelly Services Might Find It Hard To Continue The Dividend
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. While Kelly Services is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.
Over the next year, EPS is forecast to rise by 93.9%. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.
See our latest analysis for Kelly Services
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.30. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Company Could Face Some Challenges Growing The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kelly Services has impressed us by growing EPS at 14% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.
Our Thoughts On Kelly Services' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kelly Services' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Kelly Services that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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