I am looking for a secure dividend with some long term capital appreciation. In your opinion how safe is the monthly dividend. Are their debt ratios ok? Do they have much competition?
Thanks very much
KBL signs long term contracts with hospitals and government agenices. While there is competition, it has strong market share and does not lose contracts often. Contracts are often for 10 years or even more which adds some security to revenue. It has $116M in liabilities, but about half its debt is lease obligations. Its cash flow is quite consistent and largely recession-proof (at least resistant) and we would not consider the debt to be problematic. Dividend payout ratio is 55% and we would consider the dividend quite secure. We would note, however, it has not raised the dividend since 2014. The quarter was solid, with all metrics nicely beating estimates. Revenue rose 14% and per-share earnings nearly tripled from last year. The company noted that margins are now returning to pre-pandemic levels. The stock is doing quite well this year, though generally we would view it more for income than for gains. But we would be quite comfortable owning it, paying a higher valuation (22X) for comfort/security/income.