Just Four Days Till Kainos Group plc (LON:KNOS) Will Be Trading Ex-Dividend

It looks like Kainos Group plc (LON:KNOS) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Kainos Group's shares on or after the 21st of November will not receive the dividend, which will be paid on the 13th of December.

The company's next dividend payment will be UK£0.093 per share, and in the last 12 months, the company paid a total of UK£0.27 per share. Based on the last year's worth of payments, Kainos Group has a trailing yield of 3.2% on the current stock price of UK£8.49. 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! So we need to investigate whether Kainos Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Kainos Group

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. Kainos Group paid out 68% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Kainos Group generated enough free cash flow to afford its dividend. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Kainos Group'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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Kainos Group has grown its earnings rapidly, up 24% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, nine years ago, Kainos Group has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Kainos Group got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Kainos Group's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 68% and 53% respectively. In summary, it's hard to get excited about Kainos Group from a dividend perspective.

So while Kainos Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Kainos Group that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.