Why You Might Be Interested In Kelly Partners Group Holdings Limited (ASX:KPG) For Its Upcoming Dividend

Kelly Partners Group Holdings Limited (ASX:KPG) stock is about to trade ex-dividend in four days. Ex-dividend means that investors that purchase the stock on or after the 21st of January will not receive this dividend, which will be paid on the 29th of January.

Kelly Partners Group Holdings's next dividend payment will be AU$0.0033 per share. Last year, in total, the company distributed AU$0.048 to shareholders. Based on the last year's worth of payments, Kelly Partners Group Holdings has a trailing yield of 2.5% on the current stock price of A$2.15. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Kelly Partners Group Holdings

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. Kelly Partners Group Holdings is paying out an acceptable 55% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Kelly Partners Group Holdings generated enough free cash flow to afford its dividend. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Kelly Partners Group Holdings's earnings per share have been growing at 15% a year for the past 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. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kelly Partners Group Holdings has delivered 10.0% dividend growth per year on average over the past three years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

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. There's a lot to like about Kelly Partners Group Holdings, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Kelly Partners Group Holdings is facing. 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.

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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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