Be Sure To Check Out K+S Aktiengesellschaft (ETR:SDF) Before It Goes Ex-Dividend
K+S Aktiengesellschaft (ETR:SDF) is about to trade ex-dividend in the next four 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. Therefore, if you purchase K+S' shares on or after the 11th of May, you won't be eligible to receive the dividend, when it is paid on the 15th of May.
The company's next dividend payment will be €1.00 per share, and in the last 12 months, the company paid a total of €1.00 per share. Last year's total dividend payments show that K+S has a trailing yield of 5.7% on the current share price of €17.665. 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 K+S has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for K+S
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. K+S is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether K+S generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 4.2% of its cash flow last year.
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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see K+S has grown its earnings rapidly, up 52% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, K+S looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. K+S's dividend payments per share have declined at 3.3% per year on average over the past 10 years, which is uninspiring. K+S is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
Final Takeaway
Should investors buy K+S for the upcoming dividend? K+S has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in K+S for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for K+S that we strongly recommend you have a look at before investing in the company.
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.
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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