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Korvest (ASX:KOV) Has Announced That It Will Be Increasing Its Dividend To A$0.35

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Korvest Ltd (ASX:KOV) will increase its dividend from last year's comparable payment on the 2nd of September to A$0.35. This will take the dividend yield to an attractive 8.4%, providing a nice boost to shareholder returns.

See our latest analysis for Korvest

Korvest's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Korvest is earning enough to cover the payment, but then it makes up 428% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

If the trend of the last few years continues, EPS will grow by 52.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

historic-dividend
historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from A$0.26 total annually to A$0.70. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Korvest has impressed us by growing EPS at 52% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Korvest's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Korvest's payments are rock solid. While Korvest is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Korvest (of which 1 makes us a bit uncomfortable!) you should know about. Is Korvest not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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