Koninklijke KPN N.V. (AMS:KPN) Stock Goes Ex-Dividend In Just Four Days

It looks like Koninklijke KPN N.V. (AMS:KPN) is about to go ex-dividend in the next four 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. 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 Koninklijke KPN's shares on or after the 19th of April, you won't be eligible to receive the dividend, when it is paid on the 25th of April.

The company's next dividend payment will be €0.098 per share, on the back of last year when the company paid a total of €0.15 to shareholders. Based on the last year's worth of payments, Koninklijke KPN stock has a trailing yield of around 4.4% on the current share price of €3.402. 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 Koninklijke KPN can afford its dividend, and if the dividend could grow.

See our latest analysis for Koninklijke KPN

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Koninklijke KPN paid out 74% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (63%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Koninklijke KPN'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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Koninklijke KPN has grown its earnings rapidly, up 30% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Koninklijke KPN could have strong prospects for future increases to the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Koninklijke KPN has lifted its dividend by approximately 14% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Has Koninklijke KPN got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Koninklijke KPN's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 74% and 63% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Koninklijke KPN's dividend merits.

On that note, you'll want to research what risks Koninklijke KPN is facing. To help with this, we've discovered 2 warning signs for Koninklijke KPN 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.