K-Bro Linen Inc. (TSE:KBL) Stock Goes Ex-Dividend In Just Four Days
Readers hoping to buy K-Bro Linen Inc. (TSE:KBL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase K-Bro Linen's shares on or after the 29th of November will not receive the dividend, which will be paid on the 15th of December.
The company's upcoming dividend is CA$0.10 a share, following on from the last 12 months, when the company distributed a total of CA$1.20 per share to shareholders. Based on the last year's worth of payments, K-Bro Linen stock has a trailing yield of around 3.5% on the current share price of CA$34.4. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for K-Bro Linen
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. K-Bro Linen paid out 94% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether K-Bro Linen generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while K-Bro Linen's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see K-Bro Linen's earnings per share have risen 15% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. K-Bro Linen's dividend payments are broadly unchanged compared to where they were 10 years ago.
Final Takeaway
From a dividend perspective, should investors buy or avoid K-Bro Linen? K-Bro Linen has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy K-Bro Linen today.
With that being said, if dividends aren't your biggest concern with K-Bro Linen, you should know about the other risks facing this business. Case in point: We've spotted 1 warning sign for K-Bro Linen you should be aware of.
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.
