It Might Not Be A Great Idea To Buy Kallebäck Property Invest AB (publ) (STO:KAPIAB) For Its Next Dividend

Kallebäck Property Invest AB (publ) (STO:KAPIAB) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Kallebäck Property Invest's shares before the 1st of January in order to receive the dividend, which the company will pay on the 7th of January.

The company's next dividend payment will be kr03.00 per share. Last year, in total, the company distributed kr12.00 to shareholders. Last year's total dividend payments show that Kallebäck Property Invest has a trailing yield of 6.7% on the current share price of kr0179.00. If you buy this business for its dividend, you should have an idea of whether Kallebäck Property Invest's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Kallebäck Property Invest

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. 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. 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. Over the past year it paid out 200% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Cash is slightly more important than profit from a dividend perspective, but given Kallebäck Property Invest's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.

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?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. 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. In the past 10 years, Kallebäck Property Invest has increased its dividend at approximately 1.8% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Kallebäck Property Invest? 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. This is a starkly negative combination that often suggests a dividend cut could be in the company's near future. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

So if you're still interested in Kallebäck Property Invest despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 6 warning signs for Kallebäck Property Invest (of which 3 are concerning!) you should know about.

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