We Wouldn't Be Too Quick To Buy Grupo KUO, S.A.B. de C.V. (BMV:KUOB) Before It Goes Ex-Dividend

Readers hoping to buy Grupo KUO, S.A.B. de C.V. (BMV:KUOB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days 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. 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. This means that investors who purchase Grupo KUO. de's shares on or after the 26th of March will not receive the dividend, which will be paid on the 27th of March.

The company's next dividend payment will be Mex$1.31 per share. Last year, in total, the company distributed Mex$2.19 to shareholders. Calculating the last year's worth of payments shows that Grupo KUO. de has a trailing yield of 5.0% on the current share price of Mex$44.00. If you buy this business for its dividend, you should have an idea of whether Grupo KUO. de's dividend is reliable and sustainable. So we need to investigate whether Grupo KUO. de can afford its dividend, and if the dividend could grow.

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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. Last year, Grupo KUO. de paid out 204% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Grupo KUO. de didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 29% of its free cash flow in the past year.

See our latest analysis for Grupo KUO. de

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Grupo KUO. de was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Grupo KUO. de has increased its dividend at approximately 21% 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.

Remember, you can always get a snapshot of Grupo KUO. de's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Has Grupo KUO. de got what it takes to maintain its dividend payments? It's hard to get used to Grupo KUO. de paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Grupo KUO. de has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in Grupo KUO. de despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To help with this, we've discovered 2 warning signs for Grupo KUO. de (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

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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.