Is It Smart To Buy Kelly Partners Group Holdings Limited (ASX:KPG) Before It Goes Ex-Dividend?
Kelly Partners Group Holdings Limited (ASX:KPG) stock is about to trade ex-dividend in four days. If you purchase the stock on or after the 22nd of September, you won't be eligible to receive this dividend, when it is paid on the 1st of October.
Kelly Partners Group Holdings's next dividend payment will be AU$0.013 per share, and in the last 12 months, the company paid a total of AU$0.048 per share. Based on the last year's worth of payments, Kelly Partners Group Holdings has a trailing yield of 4.0% on the current stock price of A$1.215. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Kelly Partners Group Holdings has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Kelly Partners Group Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kelly Partners Group Holdings paid out 55% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 17% of its free cash flow in the last year.
It's positive to see that Kelly Partners Group Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Kelly Partners Group Holdings 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. Fortunately for readers, Kelly Partners Group Holdings's earnings per share have been growing at 15% a year for the past five years. Kelly Partners Group Holdings is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kelly Partners Group Holdings has delivered an average of 6.6% per year annual increase in its dividend, based on the past three years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Kelly Partners Group Holdings for the upcoming dividend? We like Kelly Partners Group Holdings's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Kelly Partners Group Holdings is facing. Case in point: We've spotted 4 warning signs for Kelly Partners Group Holdings you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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