Kina Securities Limited (ASX:KSL) has announced that it will pay a dividend of PGK0.06 per share on the 15th of April. Based on this payment, the dividend yield on the company's stock will be 8.6%, which is an attractive boost to shareholder returns.

View our latest analysis for Kina Securities

Kina Securities' Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Kina Securities has a good history of paying out dividends, with its current track record at 9 years. Past distributions do not necessarily guarantee future ones, but Kina Securities' payout ratio of 75% is a good sign for current shareholders as this means that earnings decently cover dividends.

Unless the company can turn things around, EPS could fall by 0.2% over the next year. However, analysts estimate the payout ratio to be 61% in 3 years, which is more comfortable than the current payout ratio.

Kina Securities' Dividend Has Lacked Consistency

Kina Securities has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was PGK0.0737 in 2016, and the most recent fiscal year payment was PGK0.256. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Kina Securities has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Kina Securities' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Kina Securities' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Kina Securities is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Kina Securities that investors should know about before committing capital to this stock. Is Kina Securities not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.