K-Bro Linen (TSE:KBL) Will Pay A Dividend Of CA$0.10

K-Bro Linen Inc. (TSE:KBL) will pay a dividend of CA$0.10 on the 13th of June. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

Our free stock report includes 1 warning sign investors should be aware of before investing in K-Bro Linen. Read for free now.

K-Bro Linen's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, K-Bro Linen's dividend made up quite a large proportion of earnings but only 36% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 63.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for K-Bro Linen

K-Bro Linen Has A Solid Track Record

The company has an extended history of paying stable dividends. The payments haven't really changed that much since 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that K-Bro Linen has been growing its earnings per share at 20% a year over the past five years. However, K-Bro Linen isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

We Really Like K-Bro Linen's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for K-Bro Linen that you should be aware of before investing. Is K-Bro Linen not quite the opportunity you were looking for? Why not check out our selection of top 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.