Don't Buy World Kinect Corporation (NYSE:WKC) For Its Next Dividend Without Doing These Checks

Readers hoping to buy World Kinect Corporation (NYSE:WKC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase World Kinect's shares before the 30th of June in order to be eligible for the dividend, which will be paid on the 16th of July.

The company's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.80 per share. Looking at the last 12 months of distributions, World Kinect has a trailing yield of approximately 2.5% on its current stock price of US$31.60. If you buy this business for its dividend, you should have an idea of whether World Kinect's dividend is reliable and sustainable. As a result, readers should always check whether World Kinect has been able to grow its dividends, or if the dividend might be cut.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. World Kinect reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out more than half (62%) of its free cash flow in the past year, which is within an average range for most companies.

Check out our latest analysis for World Kinect

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. World Kinect was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. World Kinect has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Get our latest analysis on World Kinect's balance sheet health here.

The Bottom Line

Is World Kinect worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with World Kinect. For example, World Kinect has 3 warning signs (and 1 which is significant) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.