Kingsmen Creatives Ltd. (SGX:5MZ) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Readers hoping to buy Kingsmen Creatives Ltd. (SGX:5MZ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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. This means that investors who purchase Kingsmen Creatives' shares on or after the 14th of May will not receive the dividend, which will be paid on the 29th of May.
The company's upcoming dividend is S$0.03 a share, following on from the last 12 months, when the company distributed a total of S$0.03 per share to shareholders. Calculating the last year's worth of payments shows that Kingsmen Creatives has a trailing yield of 5.0% on the current share price of S$0.605. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. That's why it's good to see Kingsmen Creatives paying out a modest 44% of its earnings. 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 15% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
See our latest analysis for Kingsmen Creatives
Click here to see how much of its profit Kingsmen Creatives 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. That's why it's comforting to see Kingsmen Creatives's earnings have been skyrocketing, up 64% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kingsmen Creatives has seen its dividend decline 1.5% per annum on average over the past 10 years, which is not great to see.
The Bottom Line
Should investors buy Kingsmen Creatives for the upcoming dividend? It's great that Kingsmen Creatives is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Kingsmen Creatives looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Kingsmen Creatives for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Kingsmen Creatives that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.