Kingfa Science & Technology (India) Limited (NSE:KINGFA) Passed Our Checks, And It's About To Pay A ₹10.00 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kingfa Science & Technology (India) Limited (NSE:KINGFA) is about to go ex-dividend in just 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Kingfa Science & Technology (India)'s shares on or after the 18th of September will not receive the dividend, which will be paid on the 24th of October.

The upcoming dividend for Kingfa Science & Technology (India) is ₹10.00 per share. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Kingfa Science & Technology (India)

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. Kingfa Science & Technology (India) is paying out just 9.9% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Kingfa Science & Technology (India) paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Kingfa Science & Technology (India) paid out over the last 12 months.

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. 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 Kingfa Science & Technology (India)'s earnings have been skyrocketing, up 46% per annum for the past five years.

This is Kingfa Science & Technology (India)'s first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

To Sum It Up

Is Kingfa Science & Technology (India) worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Kingfa Science & Technology (India) appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Kingfa Science & Technology (India) has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Kingfa Science & Technology (India) (1 is a bit concerning!) that deserve your attention before investing in the 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.