Kelly Partners Group Holdings Limited (ASX:KPG) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 24th of March will not receive the dividend, which will be paid on the 2nd of April.
Kelly Partners Group Holdings's next dividend payment will be AU$0.012 per share, and in the last 12 months, the company paid a total of AU$0.048 per share. Last year's total dividend payments show that Kelly Partners Group Holdings has a trailing yield of 7.4% on the current share price of A$0.655. 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! 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.
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. Kelly Partners Group Holdings is paying out an acceptable 73% of its profit, a common payout level among most companies. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow 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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Kelly Partners Group Holdings's earnings per share have risen 17% per annum over the last 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. This is a reasonable combination that could hint at some 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 10% per year annual increase in its dividend, based on the past two years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Kelly Partners Group Holdings worth buying for its 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. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Kelly Partners Group Holdings for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 5 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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