Insights into Kesko Oyj's Dividend Performance, Sustainability, and Growth Prospects
Kesko Oyj (KKOYY, Financial) recently announced a dividend of $0.15 per share, payable on 2023-10-04, with the ex-dividend date set for 2023-09-11. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Kesko Oyj's dividend performance and assess its sustainability.
What Does Kesko Oyj Do?
Kesko Oyj is a Finland-based retail conglomerate that operates in three divisions: Grocery, Building and Technical, and Car. The Grocery segment provides the customers with K-food retailers running their locally tailored stores, acting in a chain business model. Chains include K-Citymarket, K-Supermarket, K-Market, and Neste K. The Building and Technical Sector produces construction materials, leisure athletic goods, and infrastructure tools and operates out of Scandinavia and Eastern Europe, both in digital and brick-and-mortar stores. The Car division acts as an importer and leaser for various European car brands, including Volkswagen, SEAT, Audi, and Porsche as well as a seller of used cars online and in-store. The Grocery segment in Finland produces the most revenue.
A Glimpse at Kesko Oyj's Dividend History
Kesko Oyj has maintained a consistent dividend payment record since 2012. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Kesko Oyj's Dividend Yield and Growth
As of today, Kesko Oyj currently has a 12-month trailing dividend yield of 5.97% and a 12-month forward dividend yield of 6.11%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Kesko Oyj's annual dividend growth rate was 21.90%. Extended to a five-year horizon, this rate decreased to 14.60% per year. And over the past decade, Kesko Oyj's annual dividends per share growth rate stands at an impressive 12.00%.
Based on Kesko Oyj's dividend yield and five-year growth rate, the 5-year yield on cost of Kesko Oyj stock as of today is approximately 11.80%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Kesko Oyj's dividend payout ratio is 0.76. This may suggest that the company's dividend may not be sustainable.
Kesko Oyj's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Kesko Oyj's profitability 7 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Kesko Oyj's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Kesko Oyj's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Kesko Oyj's revenue has increased by approximately 3.20% per year on average, a rate that underperforms than approximately 58.97% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Kesko Oyj's earnings increased by approximately 22.60% per year on average, a rate that underperforms than approximately 35.98% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 22.90%, underperforms than approximately 23.49% of global competitors.
Conclusion: A Balanced View on Kesko Oyj's Dividend Prospects
While Kesko Oyj has demonstrated a consistent dividend payment record and impressive growth rates, its high payout ratio raises questions about the sustainability of its dividends in the long run. Its profitability rank and positive net income trend, however, paint a promising picture. The company's growth metrics, though mixed, show potential for future expansion. As such, investors should carefully consider these factors when evaluating Kesko Oyj's dividend prospects.
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