Is It Worth Considering Kumpulan Kitacon Berhad (KLSE:KITACON) For Its Upcoming Dividend?

Readers hoping to buy Kumpulan Kitacon Berhad (KLSE:KITACON) 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. Therefore, if you purchase Kumpulan Kitacon Berhad's shares on or after the 9th of December, you won't be eligible to receive the dividend, when it is paid on the 22nd of December.

The company's next dividend payment will be RM00.01 per share, on the back of last year when the company paid a total of RM0.03 to shareholders. Based on the last year's worth of payments, Kumpulan Kitacon Berhad stock has a trailing yield of around 4.3% on the current share price of RM00.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Kumpulan Kitacon Berhad can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Kumpulan Kitacon Berhad paying out a modest 28% of its earnings. A useful secondary check can be to evaluate whether Kumpulan Kitacon Berhad generated enough free cash flow to afford its dividend. The good news is it paid out just 16% of its free cash flow in the last year.

It's positive to see that Kumpulan Kitacon Berhad'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.

See our latest analysis for Kumpulan Kitacon Berhad

Click here to see how much of its profit Kumpulan Kitacon Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Kumpulan Kitacon Berhad's earnings per share have plummeted approximately 48% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kumpulan Kitacon Berhad's dividend payments per share have declined at 9.1% per year on average over the past three years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Should investors buy Kumpulan Kitacon Berhad for the upcoming dividend? Kumpulan Kitacon Berhad has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So while Kumpulan Kitacon Berhad 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 Kumpulan Kitacon Berhad that you should be aware of before investing in their shares.

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.