Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Kurgan Generation Company Public Joint Stock Company (MCX: KGKC) is set to be ex-dividend in just 4 days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. Thus, you can buy Kurgan Generation shares before July 16 in order to receive the dividend that the company will pay on January 1.
The company’s upcoming dividend is 2.25 per share, following on from the past 12 months when the company has distributed a total of 2.25 per share to shareholders. Last year’s total dividend payments show Kurgan Generation has a rolling 4.4% return on RUB51’s current share price. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
See our latest analysis for Kurgan Generation
Dividends are usually paid out of company profits. If a company pays more dividends than it made a profit, the dividend could be unsustainable. It paid out 86% of its profits as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a downturn in activity. We would be concerned if profits started to decline. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. It distributed 47% of its free cash flow in the form of dividends, a comfortable level of distribution for most companies.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to see how much of its profits Kurgan Generation has paid in the past 12 months.
Have profits and dividends increased?
When profits fall, dividend companies become much more difficult to analyze and to safely own. Investors love dividends, so if profits fall and the dividend is reduced, expect a stock to be sold massively at the same time. Readers will then understand why we are concerned that Kurgan Generation’s earnings per share have fallen 29% per year over the past five years. When earnings per share decrease, the maximum amount of dividends that can be paid also decreases.
Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. Over the past six years, Kurgan Generation has increased its dividend by around 35% per year on average. It’s intriguing, but the combination of growing dividends despite falling profits can usually only be achieved by paying a higher percentage of the profits. Kurgan Generation is already paying out 86% of its profits, and with declining profits, we believe this dividend is unlikely to grow rapidly in the future.
The bottom line
From a dividend perspective, should investors buy or avoid Kurgan Generation? We’re not thrilled with the drop in earnings per share, although at least the company’s payout ratio is in a reasonable range, meaning there may not be any imminent risk. lower dividend. Overall, we are not extremely bearish on the stock, but there are probably better dividend investments.
However, if you are still interested in Kurgan Generation as a potential investment, you should definitely consider some of the risks associated with Kurgan Generation. We have identified 4 warning signs with Kurgan Generation (at least 1 which is potentially serious), and understanding them should be part of your investment process.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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