Kronos Worldwide, Inc. (KRO): Among the Biggest Dividend Cuts and Suspensions of 2024

Kronos Worldwide, Inc. (KRO), a leading producer of titanium dioxide pigments, has made headlines recently due to its decision to cut its dividend. This move, along with other significant dividend reductions and suspensions in 2024, has raised concerns among investors about the financial health of these companies. In this article, we will delve into the reasons behind Kronos Worldwide's dividend cut and explore the broader implications for investors.

Kronos Worldwide's financial performance in 2024 led to the dividend cut, with earnings per share (EPS) declining by 14% annually. This decline, coupled with a payout ratio of 76% and a free cash flow payout ratio of 110%, raised concerns about the sustainability of the company's dividend. Despite paying out less in dividends than it reported in profits, Kronos Worldwide's inability to generate enough cash to cover the dividend put its ability to maintain the dividend at risk.



The company's debt levels and cash flow also played a role in the decision to cut the dividend. Kronos Worldwide's total debt increased by 15% in 2023, reaching $1.2 billion, while its cash flow from operations decreased by 10% to $87.6 million. This combination of higher debt and lower cash flow may have strained the company's ability to maintain its dividend payout. Additionally, KRO's payout ratio, which was 76% in 2023, indicated that the company was distributing a significant portion of its earnings as dividends, leaving less cash available for debt repayment or reinvestment in the business.



The market and investors reacted negatively to Kronos Worldwide's dividend cut, with the stock price dropping by 15% on the day of the announcement. This was likely due to the disappointment of investors who had been relying on the dividend for income. The dividend cut also raised concerns about the company's financial health and its ability to maintain its dividend in the future. Despite the initial negative reaction, the stock price has since recovered, indicating that investors may be focusing more on the company's long-term prospects rather than the dividend cut.

Kronos Worldwide's earnings growth has been volatile, with a 14% decline in earnings per share over the past five years. This decline has impacted its dividend payouts, as the company paid out 76% of its earnings as dividends last year, which is not unreasonable but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. Additionally, Kronos Worldwide paid out 110% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. This raises concerns about the sustainability of the dividend, as the company may struggle to maintain its payouts if earnings continue to decline.



Changes in the company's cash flow have also played a role in its ability to sustain dividends. Kronos Worldwide, Inc. (KRO) has faced challenges in sustaining its dividends, with a payout ratio of 76% and a cash flow payout ratio of 110% in 2023. This indicates that the company has been distributing more in dividends than it earns or generates in cash flow, which is unsustainable in the long term. A decline in earnings per share of 14% over the past five years has also raised concerns about the future sustainability of the dividend. To maintain its dividend, KRO must improve its earnings and cash flow generation.



Fluctuations in Kronos Worldwide's stock price have significantly impacted its dividend yield and investor sentiment. The company's dividend yield, calculated by dividing the annual dividend payment by the prevailing share price, has been volatile. In 2024, the dividend yield reached a high of 3.0% in October, following a stock price dip, and a low of 1.7% in November, after the stock price rebounded. This volatility reflects investors' sensitivity to dividend payouts and the company's financial health. Despite the fluctuations, Kronos Worldwide has maintained a consistent quarterly dividend, indicating a commitment to shareholder returns. However, the company's dividend cover, approximately 2.0, suggests that it may be vulnerable to dividend cuts or suspensions if earnings decline.

In conclusion, Kronos Worldwide's dividend cut in 2024 was a result of the company's financial performance, debt levels, and cash flow. The market and investors reacted negatively to the cut, but the stock price has since recovered. The company's earnings growth and cash flow have raised concerns about the sustainability of its dividend, and fluctuations in the stock price have impacted its dividend yield and investor sentiment. As investors evaluate the impact of dividend cuts and suspensions on their portfolios, it is essential to consider the underlying financial health of the companies involved and the broader market trends.