Yahoo Finance Korvest (ASX:KOV) Is Paying Out A Larger Dividend Than Last Year
Korvest Ltd (ASX:KOV) has announced that it will be increasing its dividend on the 4th of April to AU$0.25. This makes the dividend yield 5.8%, which is above the industry average.
View our latest analysis for Korvest
Korvest's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Korvest is earning enough to cover the payment, but the it makes up 1,796% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Looking forward, earnings per share could rise by 353.6% over the next year if recent trends continue. If the dividend extends its recent trend, estimates say the dividend could reach 12%, which is in a pretty sustainable range.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from AU$0.22 to AU$0.50. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Korvest has been growing its earnings per share at 354% a year over the past five years. Korvest is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Korvest is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Korvest has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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.
