Be sure to check KAL Group Limited (JSE:KAL) before the ex-dividend

KAL GROUP LTD (JSE: tomorrow) The stock is scheduled to trade ex-dividend in four days. The ex-dividend date is typically two days before the record date, the day on which shareholders are required to appear on the company's books to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to be settled before the record date to be eligible for the dividend. Therefore, if you buy KAL Group shares on or after June 10, you will not be eligible to receive the dividend when it is paid on June 15.

The company's next dividend payment will be R00.70 per share, and in the last 12 months, the company paid a total of R2.10 per share. Looking at the distribution over the last 12 months, KAL Group has a trailing yield of approximately 4.6% on the current stock price of R046.05. Dividends are an important source of income for many shareholders, but the health of the business is vital to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned its dividend is usually at greater risk of being cut. KAL Group paid out 32% of its profit last year. Yet cash flow is even more important than profits when assessing a dividend, so we need to look at whether the company generated enough cash to pay its distribution. Luckily it paid out only 20% of its free cash flow last year.

It's positive to see that KAL Group's dividend is covered by both profits and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger margin of safety before the dividend gets cut.

See our latest analysis for KAL Group

Click Here's how much of its profit KAL Group paid out over the last 12 months.

Are earnings and dividends growing?

Stocks of companies that generate sustainable earnings growth often make the best dividend prospects, because it is easier to raise the dividend when earnings are growing. If earnings decline significantly, the company may be forced to cut its dividend. Luckily for readers, KAL Group's earnings per share have been growing at 12% per year for the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; An attractive combination that could indicate the company is focusing on reinvestment to grow earnings further. This will make it easier to finance future growth efforts and we believe this is an attractive combination – plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much dividend payments have changed over time. Based on the last nine years of dividend payments, KAL Group has delivered an average annual increase of 11% per year in its dividend. Both earnings and dividends per share have been growing rapidly in recent times, which is great to see.

to sum it up

From a dividend perspective, should investors buy or avoid KAL Group? It's great that KAL Group is growing earnings per share while also paying out a low percentage of both its earnings and cash flow. It's disappointing to see that the dividend has been cut at least once in the past, but as things stand right now, the low payout ratio suggests a conservative approach to the dividend, which we like. There's a lot to like about KAL Group, and we'd prefer to take a closer look at it.

So while KAL Group looks good from a dividend perspective, it's always worthwhile keeping up to date about the risks involved in this stock. Our analysis shows 1 warning sign for KAL GROUP And you should know about this before buying any share.

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This article from Simply Wall St is of a general nature. We only provide commentary based on historical data and analyst forecasts using unbiased methodology and our articles are not intended to provide financial advice. It does not recommend buying or selling any stock, and does not take into account your objectives, or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.