It looks like Korporacja KGL S.A. (WSE:KGL) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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 Korporacja KGL's shares on or after the 24th of June will not receive the dividend, which will be paid on the 16th of July.
The company's next dividend payment will be zł0.35 per share, and in the last 12 months, the company paid a total of zł0.35 per share. Looking at the last 12 months of distributions, Korporacja KGL has a trailing yield of approximately 2.1% on its current stock price of PLN16.95. If you buy this business for its dividend, you should have an idea of whether Korporacja KGL's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Korporacja KGL is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Korporacja KGL generated enough free cash flow to afford its dividend. Fortunately, it paid out only 27% of its free cash flow in the past 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.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Korporacja KGL's earnings are down 2.2% 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. Korporacja KGL has delivered 17% dividend growth per year on average over the past four years.
To Sum It Up
Should investors buy Korporacja KGL for the upcoming dividend? Korporacja KGL 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. All things considered, we are not particularly enthused about Korporacja KGL from a dividend perspective.
On that note, you'll want to research what risks Korporacja KGL is facing. In terms of investment risks, we've identified 3 warning signs with Korporacja KGL and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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