Readers hoping to buy Kumpulan Kitacon Berhad (KLSE:KITACON) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Kumpulan Kitacon Berhad's shares on or after the 26th of September, you won't be eligible to receive the dividend, when it is paid on the 11th of October.
The company's next dividend payment will be RM00.01 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Based on the last year's worth of payments, Kumpulan Kitacon Berhad stock has a trailing yield of around 2.6% on the current share price of RM00.775. If you buy this business for its dividend, you should have an idea of whether Kumpulan Kitacon Berhad's dividend is reliable and sustainable. So we need to investigate whether Kumpulan Kitacon Berhad can afford its dividend, and if the dividend could grow.
View our latest analysis for Kumpulan Kitacon Berhad
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kumpulan Kitacon Berhad is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Kumpulan Kitacon Berhad generated enough free cash flow to afford its dividend. It distributed 40% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Kumpulan Kitacon Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Kumpulan Kitacon Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Kumpulan Kitacon Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 51% a year over the past five years.