Should Income Investors Look At Kingboard Holdings Limited (HKG:148) Before Its Ex-Dividend?

Kingboard Holdings Limited (HKG:148) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Meaning, you will need to purchase Kingboard Holdings' shares before the 12th of December to receive the dividend, which will be paid on the 7th of January.

The company's next dividend payment will be HK$0.69 per share, on the back of last year when the company paid a total of HK$1.84 to shareholders. Based on the last year's worth of payments, Kingboard Holdings has a trailing yield of 6.8% on the current stock price of HK$27.02. If you buy this business for its dividend, you should have an idea of whether Kingboard Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. Kingboard Holdings paid out 50% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Kingboard Holdings generated enough free cash flow to afford its dividend. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Kingboard 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.

Check out our latest analysis for Kingboard Holdings

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Kingboard Holdings's earnings are down 3.1% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Kingboard Holdings has increased its dividend at approximately 12% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

From a dividend perspective, should investors buy or avoid Kingboard Holdings? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. All things considered, we are not particularly enthused about Kingboard Holdings from a dividend perspective.

So if you want to do more digging on Kingboard Holdings, you'll find it worthwhile knowing the risks that this stock faces. For instance, we've identified 3 warning signs for Kingboard Holdings (1 is a bit concerning) you should be aware of.

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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.