Here's What We Like About Kelly Partners Group Holdings' (ASX:KPG) Upcoming Dividend

Kelly Partners Group Holdings Limited (ASX:KPG) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Kelly Partners Group Holdings' shares on or after the 22nd of May will not receive the dividend, which will be paid on the 31st of May.

The company's upcoming dividend is AU$0.004 a share, following on from the last 12 months, when the company distributed a total of AU$0.068 per share to shareholders. Looking at the last 12 months of distributions, Kelly Partners Group Holdings has a trailing yield of approximately 1.5% on its current stock price of A$4.5. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out 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 is paying out an acceptable 61% of its profit, a common payout level among 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. Luckily it paid out just 19% of its free 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.

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?

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 20% per annum over the last five years. Kelly Partners Group Holdings has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past five years, Kelly Partners Group Holdings has increased its dividend at approximately 11% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Kelly Partners Group Holdings? Kelly Partners Group Holdings's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Kelly Partners Group Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Kelly Partners Group Holdings for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Kelly Partners Group Holdings that you should be aware of before investing in their 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.