Readers hoping to buy World Kinect Corporation (NYSE:WKC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Thus, you can purchase World Kinect's shares before the 22nd of March in order to receive the dividend, which the company will pay on the 16th of April.
The company's upcoming dividend is US$0.17 a share, following on from the last 12 months, when the company distributed a total of US$0.56 per share to shareholders. Looking at the last 12 months of distributions, World Kinect has a trailing yield of approximately 2.7% on its current stock price of US$24.88. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for World Kinect
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. World Kinect paid out 65% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 19% of its free cash flow in the last year.
It's positive to see that World Kinect'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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. World Kinect's earnings per share have fallen at approximately 14% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. World Kinect has delivered 16% dividend growth per year on average over the past 10 years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.