Why You Might Be Interested In Kumulus Vape S.A. (EPA:ALVAP) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kumulus Vape S.A. (EPA:ALVAP) is about to trade ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Kumulus Vape's shares before the 26th of June in order to receive the dividend, which the company will pay on the 30th of June.

The company's upcoming dividend is €0.17 a share, following on from the last 12 months, when the company distributed a total of €0.17 per share to shareholders. Last year's total dividend payments show that Kumulus Vape has a trailing yield of 3.7% on the current share price of €4.62. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Kumulus Vape has a low and conservative payout ratio of just 20% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow.

See our latest analysis for Kumulus Vape

Click here to see how much of its profit Kumulus Vape 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Kumulus Vape's earnings have been skyrocketing, up 86% per annum for the past five years.

Kumulus Vape also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last two years, Kumulus Vape has lifted its dividend by approximately 30% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Kumulus Vape for the upcoming dividend? We like that Kumulus Vape has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Kumulus Vape's dividend merits.

So while Kumulus Vape looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 3 warning signs for Kumulus Vape (1 is a bit unpleasant!) that deserve your attention before investing in the shares.

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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.