Four Days Left To Buy Korvest Ltd (ASX:KOV) Before The Ex-Dividend Date

It looks like Korvest Ltd (ASX:KOV) is about to go ex-dividend in the next 4 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Korvest's shares on or after the 15th of February will not receive the dividend, which will be paid on the 5th of March.

The company's next dividend payment will be AU$0.25 per share, and in the last 12 months, the company paid a total of AU$0.60 per share. Based on the last year's worth of payments, Korvest has a trailing yield of 6.5% on the current stock price of AU$9.19. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Korvest

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Korvest paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.

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 how much of its profit Korvest paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Korvest's earnings have been skyrocketing, up 54% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Korvest could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Korvest has delivered 2.7% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Korvest is keeping back more of its profits to grow the business.

The Bottom Line

Has Korvest got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Korvest's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 56% and 51% respectively. All things considered, we are not particularly enthused about Korvest from a dividend perspective.

While it's tempting to invest in Korvest for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Korvest and you should be aware of them before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.