We Wouldn't Be Too Quick To Buy Kennedy-Wilson Holdings, Inc. (NYSE:KW) Before It Goes Ex-Dividend

It looks like Kennedy-Wilson Holdings, Inc. (NYSE:KW) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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, Kennedy-Wilson Holdings investors that purchase the stock on or after the 28th of June will not receive the dividend, which will be paid on the 5th of July.

The company's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.96 to shareholders. Last year's total dividend payments show that Kennedy-Wilson Holdings has a trailing yield of 9.9% on the current share price of US$9.73. If you buy this business for its dividend, you should have an idea of whether Kennedy-Wilson Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Kennedy-Wilson Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kennedy-Wilson Holdings lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Kennedy-Wilson Holdings 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. Over the past year it paid out 157% 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.

Click here to see how much of its profit Kennedy-Wilson Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Kennedy-Wilson Holdings 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Kennedy-Wilson Holdings has increased its dividend at approximately 13% a year on average.

Get our latest analysis on Kennedy-Wilson Holdings's balance sheet health here.

The Bottom Line

Is Kennedy-Wilson Holdings worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." It's not that we think Kennedy-Wilson Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that in mind though, if the poor dividend characteristics of Kennedy-Wilson Holdings don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 3 warning signs for Kennedy-Wilson Holdings that you should be aware of before investing in their 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.

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