Be Sure To Check Out Knights Group Holdings plc (LON:KGH) Before It Goes Ex-Dividend

It looks like Knights Group Holdings plc (LON:KGH) is about to go ex-dividend in the next three 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Knights Group Holdings investors that purchase the stock on or after the 13th of February will not receive the dividend, which will be paid on the 14th of March.

The company's next dividend payment will be UK£0.0176 per share, and in the last 12 months, the company paid a total of UK£0.045 per share. Calculating the last year's worth of payments shows that Knights Group Holdings has a trailing yield of 3.7% on the current share price of UK£1.24. If you buy this business for its dividend, you should have an idea of whether Knights Group Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Knights Group Holdings

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. That's why it's good to see Knights Group Holdings paying out a modest 34% of its earnings. A useful secondary check can be to evaluate whether Knights Group Holdings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

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, Knights Group Holdings's earnings per share have been growing at 18% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last six years, Knights Group Holdings has lifted its dividend by approximately 25% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Knights Group Holdings got what it takes to maintain its dividend payments? It's great that Knights Group Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Knights Group Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Knights Group Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Knights Group Holdings that you should be aware of before investing in their shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.