Readers hoping to buy Kelly Partners Group Holdings Limited (ASX:KPG) 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, Kelly Partners Group Holdings investors that purchase the stock on or after the 17th of February will not receive the dividend, which will be paid on the 28th of February.

The company's next dividend payment will be AU$0.004 per share, and in the last 12 months, the company paid a total of AU$0.068 per share. Looking at the last 12 months of distributions, Kelly Partners Group Holdings has a trailing yield of approximately 1.5% on its current stock price of A$4.37. 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! So we need to investigate whether Kelly Partners Group Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Kelly Partners Group Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Kelly Partners Group Holdings paid out 61% 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. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Kelly Partners Group Holdings'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 Kelly Partners Group Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Kelly Partners Group Holdings's earnings per share have risen 20% per annum over the last five years. Kelly Partners Group Holdings has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kelly Partners Group Holdings has delivered 11% dividend growth per year on average over the past five years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Should investors buy Kelly Partners Group Holdings for the upcoming dividend? Kelly Partners Group Holdings's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 3 warning signs for Kelly Partners Group Holdings you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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

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.

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