Dividend Investors: Don't Be Too Quick To Buy Grupo KUO, S.A.B. de C.V. (BMV:KUOB) For Its Upcoming Dividend

Grupo KUO, S.A.B. de C.V. (BMV:KUOB) is about to trade 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. In other words, investors can purchase Grupo KUO. de's shares before the 19th of April in order to be eligible for the dividend, which will be paid on the 23rd of April.

The company's upcoming dividend is Mex$0.91 a share, following on from the last 12 months, when the company distributed a total of Mex$1.82 per share to shareholders. Last year's total dividend payments show that Grupo KUO. de has a trailing yield of 4.3% on the current share price of Mex$42.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Grupo KUO. de

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. Grupo KUO. de paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies.

Click here to see how much of its profit Grupo KUO. de paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Grupo KUO. de's earnings per share have dropped 19% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Grupo KUO. de has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

To Sum It Up

Should investors buy Grupo KUO. de for the upcoming dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. It doesn't appear an outstanding opportunity, but could be worth a closer look.

If you're not too concerned about Grupo KUO. de's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, Grupo KUO. de has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.

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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.