We Wouldn’t Be Too Quick To Buy Karat Packaging Inc. (NASDAQ:KRT) Before It Goes Ex-Dividend

Simply Wall St

Sun, February 15, 2026 at 9:12 PM GMT+9 4 min read

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KRT

+0.27%

Readers hoping to buy Karat Packaging Inc. (NASDAQ:KRT) 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. Therefore, if you purchase Karat Packaging’s shares on or after the 20th of February, you won’t be eligible to receive the dividend, when it is paid on the 27th of February.

The company’s next dividend payment will be US$0.45 per share, on the back of last year when the company paid a total of US$1.80 to shareholders. Based on the last year’s worth of payments, Karat Packaging has a trailing yield of 7.0% on the current stock price of US$25.79. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Karat Packaging can afford its dividend, and if the dividend could grow.

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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. Karat Packaging distributed an unsustainably high 116% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. 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. Karat Packaging paid out more free cash flow than it generated - 158%, to be precise - last year, which we think is concerningly high. We’re curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Cash is slightly more important than profit from a dividend perspective, but given Karat Packaging’s payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.

See our latest analysis for Karat Packaging

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

NasdaqGS:KRT Historic Dividend February 15th 2026

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s comforting to see Karat Packaging’s earnings have been skyrocketing, up 68% per annum for the past five years. Karat Packaging’s dividend was not well covered by earnings, although at least its earnings per share are growing quickly. Fast-growing businesses normally need to reinvest most of their earnings in order to maintain growth, so we’d suspect that either earnings growth will slow or the dividend may not be increased for a while.

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The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Karat Packaging has lifted its dividend by approximately 73% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Karat Packaging an attractive dividend stock, or better left on the shelf? While it’s nice to see earnings per share growing, we’re curious about how Karat Packaging intends to continue growing, or maintain the dividend in a downturn given that it’s paying out such a high percentage of its earnings and cashflow. With the way things are shaping up from a dividend perspective, we’d be inclined to steer clear of Karat Packaging.

With that being said, if you’re still considering Karat Packaging as an investment, you’ll find it beneficial to know what risks this stock is facing. Case in point: We’ve spotted 1 warning sign for Karat Packaging you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch** with us directly.**_ Alternatively, email editorial-team (at) simplywallst.com._

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.

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