PSG Konsult (JSE:KST) Could Be A Buy For Its Upcoming Dividend

Simply Wall St
October 22, 2021
Source: Shutterstock

Readers hoping to buy PSG Konsult Limited (JSE:KST) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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, PSG Konsult investors that purchase the stock on or after the 27th of October will not receive the dividend, which will be paid on the 2nd of November.

The company's next dividend payment will be R0.10 per share, on the back of last year when the company paid a total of R0.27 to shareholders. Calculating the last year's worth of payments shows that PSG Konsult has a trailing yield of 1.9% on the current share price of ZAR13.6. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether PSG Konsult can afford its dividend, and if the dividend could grow.

Check out our latest analysis for PSG Konsult

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. PSG Konsult paid out a comfortable 45% of its profit last year.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit PSG Konsult paid out over the last 12 months.

JSE:KST Historic Dividend October 23rd 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see PSG Konsult has grown its earnings rapidly, up 20% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past seven years, PSG Konsult has increased its dividend at approximately 19% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is PSG Konsult an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating PSG Konsult more closely.

Keen to explore more data on PSG Konsult's financial performance? Check out our visualisation of its historical revenue and earnings growth.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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