Kelly Services (NASDAQ:KELY.A) Has Announced A Dividend Of $0.075
Kelly Services (NASDAQ:KELY.A) announced a dividend of $0.075 per share, payable on December 3rd, with an annual yield of 3.6%. Despite a 41% stock price drop in 3 months, the dividend is covered by healthy cash flows. EPS is expected to grow by 124.7% next year, with a payout ratio of 28%. However, past dividend volatility and declining EPS raise concerns about long-term reliability. Investors should be cautious and consider other income investments.
Kelly Services, Inc. (NASDAQ:KELY.A) has announced that it will pay a dividend of $0.075 per share on the 3rd of December. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Kelly Services' stock price has reduced by 41% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
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Kelly Services' Future Dividend Projections Seem Positive
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Kelly Services isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
The next year is set to see EPS grow by 124.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.
View our latest analysis for Kelly Services
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from $0.20 total annually to $0.30. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Dividend Growth Potential Is Shaky
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Kelly Services' EPS has declined at around 26% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Kelly Services that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
