Yahoo Finance Should Income Investors Look At The Keg Royalties Income Fund (TSE:KEG.UN) Before Its Ex-Dividend?
The Keg Royalties Income Fund (TSE:KEG.UN) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Keg Royalties Income Fund's shares on or after the 28th of December, you won't be eligible to receive the dividend, when it is paid on the 31st of January.
The company's upcoming dividend is CA$0.17 a share, following on from the last 12 months, when the company distributed a total of CA$1.14 per share to shareholders. Based on the last year's worth of payments, Keg Royalties Income Fund stock has a trailing yield of around 8.3% on the current share price of CA$13.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Keg Royalties Income Fund
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Keg Royalties Income Fund is paying out an acceptable 56% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Keg Royalties Income Fund'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 Keg Royalties Income Fund 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. This is why it's a relief to see Keg Royalties Income Fund earnings per share are up 6.0% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Keg Royalties Income Fund has lifted its dividend by approximately 1.7% a year on average.
To Sum It Up
Has Keg Royalties Income Fund got what it takes to maintain its dividend payments? While earnings per share growth has been modest, Keg Royalties Income Fund's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
In light of that, while Keg Royalties Income Fund has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Keg Royalties Income Fund that you should be aware of before investing in their shares.
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.
