Income Investors Should Know That The Keg Royalties Income Fund (TSE:KEG.UN) Goes Ex-Dividend Soon
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that The Keg Royalties Income Fund (TSE:KEG.UN) is about to go ex-dividend in just 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Keg Royalties Income Fund's shares before the 20th of March in order to be eligible for the dividend, which will be paid on the 29th of March.
The company's next dividend payment will be CA$0.0946 per share, on the back of last year when the company paid a total of CA$1.14 to shareholders. Based on the last year's worth of payments, Keg Royalties Income Fund stock has a trailing yield of around 7.5% on the current share price of CA$15.14. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Keg Royalties Income Fund
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Keg Royalties Income Fund paid out 56% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Keg Royalties Income Fund paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Keg Royalties Income Fund, with earnings per share up 6.0% on average over the last five years. Decent historical earnings per share growth suggests Keg Royalties Income Fund has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Keg Royalties Income Fund has delivered an average of 1.7% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Final Takeaway
Is Keg Royalties Income Fund worth buying for its dividend? Earnings per share growth has been modest and Keg Royalties Income Fund paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, while it has some positive characteristics, we're not inclined to race out and buy Keg Royalties Income Fund today.
In light of that, while Keg Royalties Income Fund has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Keg Royalties Income Fund that you should be aware of before investing in their shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
