We Wouldn't Be Too Quick To Buy Kallebäck Property Invest AB (publ) (STO:KAPIAB) Before It Goes Ex-Dividend

It looks like Kallebäck Property Invest AB (publ) (STO:KAPIAB) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Kallebäck Property Invest investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 5th of October.

The company's next dividend payment will be kr3.00 per share, and in the last 12 months, the company paid a total of kr12.00 per share. Looking at the last 12 months of distributions, Kallebäck Property Invest has a trailing yield of approximately 6.9% on its current stock price of SEK174.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Kallebäck Property Invest distributed an unsustainably high 118% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether Kallebäck Property Invest generated enough free cash flow to afford its dividend. It paid out 88% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's good to see that while Kallebäck Property Invest's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Kallebäck Property Invest's earnings are down 2.5% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kallebäck Property Invest has delivered an average of 2.3% per year annual increase in its dividend, based on the past eight years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Kallebäck Property Invest is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

To Sum It Up

Is Kallebäck Property Invest worth buying for its dividend? Earnings per share have been shrinking in recent times. Worse, Kallebäck Property Invest's paying out a majority of its earnings and more than half its free cash flow. Positive cash flows are good news but it's not a good combination. Bottom line: Kallebäck Property Invest has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

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. For example, we've found 5 warning signs for Kallebäck Property Invest (2 are potentially serious!) that deserve your attention before investing in the 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.