Do These 3 Checks Before Buying World Kinect Corporation (NYSE:WKC) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that World Kinect Corporation (NYSE:WKC) is about to go ex-dividend in just two 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, World Kinect investors that purchase the stock on or after the 15th of December will not receive the dividend, which will be paid on the 16th of January.

The company's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.80 per share. Based on the last year's worth of payments, World Kinect stock has a trailing yield of around 3.3% on the current share price of US$24.04. If you buy this business for its dividend, you should have an idea of whether World Kinect's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. World Kinect paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If World Kinect didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

Check out our latest analysis for World Kinect

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. World Kinect reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, World Kinect has increased its dividend at approximately 13% a year on average.

Get our latest analysis on World Kinect's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid World Kinect? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Bottom line: World Kinect has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that in mind though, if the poor dividend characteristics of World Kinect don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 1 warning sign for World Kinect that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.