Is It Worth Considering Grupa Kety S.A. (WSE:KTY) For Its Upcoming Dividend?
Readers hoping to buy Grupa Kety S.A. (WSE:KTY) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Grupa Kety's shares on or after the 18th of August will not receive the dividend, which will be paid on the 4th of November.
The company's next dividend payment will be zł48.96 per share, on the back of last year when the company paid a total of zł48.97 to shareholders. Last year's total dividend payments show that Grupa Kety has a trailing yield of 3.8% on the current share price of zł1280.00. If you buy this business for its dividend, you should have an idea of whether Grupa Kety's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. Grupa Kety is paying out an acceptable 73% of its profit, a common payout level among most companies. 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 82% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's positive to see that Grupa Kety'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.
See our latest analysis for Grupa Kety
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Grupa Kety, with earnings per share up 8.5% on average over the last five years. Decent historical earnings per share growth suggests Grupa Kety has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Grupa Kety has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Grupa Kety an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Grupa Kety paid out a bit over half of its earnings and free cash flow last year. To summarise, Grupa Kety looks okay on this analysis, although it doesn't appear a stand-out opportunity.
However if you're still interested in Grupa Kety as a potential investment, you should definitely consider some of the risks involved with Grupa Kety. Every company has risks, and we've spotted 2 warning signs for Grupa Kety you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.