Is It Smart To Buy Kelly Partners Group Holdings Limited (ASX:KPG) Before It Goes Ex-Dividend?

It looks like Kelly Partners Group Holdings Limited (ASX:KPG) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 22nd of March, you won't be eligible to receive this dividend, when it is paid on the 31st of March.

Kelly Partners Group Holdings's next dividend payment will be AU$0.0033 per share. Last year, in total, the company distributed AU$0.04 to shareholders. Last year's total dividend payments show that Kelly Partners Group Holdings has a trailing yield of 1.9% on the current share price of A$2.1. 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.

See our latest analysis for Kelly Partners Group Holdings

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 paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Kelly Partners Group Holdings generated enough free cash flow to afford its dividend. The good news is it paid out just 11% of its free cash flow in the 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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Kelly Partners Group Holdings has grown its earnings rapidly, up 24% a year for the past five years. Kelly Partners Group Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Kelly Partners Group Holdings dividends are largely the same as they were three years ago.

To Sum It Up

Is Kelly Partners Group Holdings worth buying for its dividend? Kelly Partners Group Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Kelly Partners Group Holdings has 3 warning signs we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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.
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