The board of Kemper Corporation (NYSE:KMPR) has announced that it will pay a dividend on the 5th of March, with investors receiving $0.31 per share. This payment means that the dividend yield will be 2.1%, which is around the industry average.

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. Investors will be pleased to see that Kemper's stock price has increased by 50% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Kemper

Kemper's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Despite not generating a profit, Kemper is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 4.5%, which makes us pretty comfortable with the sustainability of the dividend.

Kemper Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $0.96 total annually to $1.24. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Kemper's EPS has declined at around 57% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Kemper is a great stock to add to your portfolio if income is your focus.