Don't Race Out To Buy Kallebäck Property Invest AB (publ) (STO:KAPIAB) Just Because It's Going Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kallebäck Property Invest AB (publ) (STO:KAPIAB) is about to trade ex-dividend in the next 4 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 Kallebäck Property Invest's shares before the 30th of September in order to be eligible for the dividend, which will be paid on the 4th of October.

The company's upcoming dividend is kr03.00 a share, following on from the last 12 months, when the company distributed a total of kr12.00 per share to shareholders. Calculating the last year's worth of payments shows that Kallebäck Property Invest has a trailing yield of 6.6% on the current share price of kr0180.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Kallebäck Property Invest

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, Kallebäck Property Invest paid out 354% 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. A useful secondary check can be to evaluate whether Kallebäck Property Invest generated enough free cash flow to afford its dividend. Over the past year it paid out 200% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

As Kallebäck Property Invest's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.

Click here to see how much of its profit Kallebäck Property Invest 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. Kallebäck Property Invest's earnings per share have plummeted approximately 40% 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. Since the start of our data, 10 years ago, Kallebäck Property Invest has lifted its dividend by approximately 1.8% a year on average.

The Bottom Line

Has Kallebäck Property Invest got what it takes to maintain its dividend payments? Not only are earnings per share declining, but Kallebäck Property Invest is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders as dividends. Unless there are grounds to believe a turnaround is imminent, this is one of the least attractive dividend stocks under this analysis. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Kallebäck Property Invest.

With that being said, if you're still considering Kallebäck Property Invest as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 6 warning signs with Kallebäck Property Invest (at least 3 which can't be ignored), and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.