We Wouldn't Be Too Quick To Buy Keynote Financial Services Limited (NSE:KEYFINSERV) Before It Goes Ex-Dividend

Readers hoping to buy Keynote Financial Services Limited (NSE:KEYFINSERV) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 24th of September, you won't be eligible to receive this dividend, when it is paid on the 30th of October.

Keynote Financial Services'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. Based on the last year's worth of payments, Keynote Financial Services has a trailing yield of 2.8% on the current stock price of ₹36.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Keynote Financial Services has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Keynote Financial Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Keynote Financial Services reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see how much of its profit Keynote Financial Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Keynote Financial Services reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Keynote Financial Services's dividend payments per share have declined at 4.0% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Get our latest analysis on Keynote Financial Services's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Keynote Financial Services? It's hard to get past the idea of Keynote Financial Services paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. Keynote Financial Services doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

So if you're still interested in Keynote Financial Services despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 4 warning signs for Keynote Financial Services (of which 2 can't be ignored!) you should know about.

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 decide to trade Keynote Financial Services, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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