We Wouldn't Be Too Quick To Buy Kinross Gold Corporation (TSE:K) Before It Goes Ex-Dividend

It looks like Kinross Gold Corporation (TSE:K) is about to go ex-dividend in the next four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Kinross Gold's shares on or after the 31st of May, you won't be eligible to receive the dividend, when it is paid on the 15th of June.

The company's next dividend payment will be US$0.03 per share. Last year, in total, the company distributed US$0.12 to shareholders. Calculating the last year's worth of payments shows that Kinross Gold has a trailing yield of 2.6% on the current share price of CA$6.37. 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! As a result, readers should always check whether Kinross Gold has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Kinross Gold

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year, Kinross Gold paid out 382% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser. 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. It paid out 97% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Cash is slightly more important than profit from a dividend perspective, but given Kinross Gold's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Kinross Gold's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 38% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kinross Gold's dividend payments per share have declined at 2.8% 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.

Final Takeaway

Is Kinross Gold an attractive dividend stock, or better left on the shelf? Not only are earnings per share declining, but Kinross Gold is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders as dividends. This is a clearly suboptimal combination that usually suggests the dividend is at risk of being cut. If not now, then perhaps in the future. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering Kinross Gold as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 4 warning signs we've spotted with Kinross Gold (including 2 which can't be ignored).

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.