Kumpulan Kitacon Berhad (KLSE:KITACON) Goes Ex-Dividend Soon

Kumpulan Kitacon Berhad (KLSE:KITACON) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Kumpulan Kitacon Berhad's shares before the 9th of December in order to be eligible for the dividend, which will be paid on the 24th of December.

The company's next dividend payment will be RM00.01 per share. Last year, in total, the company distributed RM0.02 to shareholders. Looking at the last 12 months of distributions, Kumpulan Kitacon Berhad has a trailing yield of approximately 2.7% on its current stock price of RM00.735. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Kumpulan Kitacon Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Kumpulan Kitacon Berhad

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 42% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 10% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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?

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. Kumpulan Kitacon Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 49% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kumpulan Kitacon Berhad's dividend payments per share have declined at 29% per year on average over the past two years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Should investors buy Kumpulan Kitacon Berhad for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Kumpulan Kitacon Berhad is facing. To that end, you should learn about the 3 warning signs we've spotted with Kumpulan Kitacon Berhad (including 1 which is a bit concerning).

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.