Is Kape Technologies plc (LON:KAPE) A Smart Choice For Dividend Investors?

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Kape Technologies plc (LON:KAPE) has begun paying dividends recently. It now yields 3.2%. Does Kape Technologies tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for Kape Technologies

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

AIM:KAPE Historical Dividend Yield October 31st 18

How does Kape Technologies fare?

The current payout ratio for KAPE is negative, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Kape Technologies as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.

Compared to its peers, Kape Technologies produces a yield of 3.2%, which is high for Software stocks but still below the market’s top dividend payers.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Kape Technologies for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three relevant factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for KAPE’s future growth? Take a look at our free research report of analyst consensus for KAPE’s outlook.

2. Valuation: What is KAPE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether KAPE is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.