The board of Kennedy-Wilson Holdings, Inc. (NYSE:KW) has announced that the dividend on 5th of July will be reduced by 50% from last year's $0.24 to $0.12. However, the dividend yield of 9.5% is still a decent boost to shareholder returns.

View our latest analysis for Kennedy-Wilson Holdings

Kennedy-Wilson Holdings' Distributions May Be Difficult To Sustain

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Kennedy-Wilson Holdings is unprofitable despite paying a dividend, and it is paying out 271% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.

Looking forward, earnings per share is forecast to rise by 65.2% over the next year. The company seems to be going down the right path, but it will take a little bit longer than a year to cross over into profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Kennedy-Wilson Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $0.28, compared to the most recent full-year payment of $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Kennedy-Wilson Holdings' EPS has fallen by approximately 34% per year during the past five years. 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, the dividend looks like it may have been a bit high, which explains why it has now been cut. Dividend payments have been pretty consistent for a while, but we do think the payout ratios are a little bit high. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Kennedy-Wilson Holdings that investors need to be conscious of moving forward. Is Kennedy-Wilson Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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