Don't Buy Anora Group Oyj (HEL:ANORA) For Its Next Dividend Without Doing These Checks

It looks like Anora Group Oyj (HEL:ANORA) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Anora Group Oyj's shares before the 18th of April in order to be eligible for the dividend, which will be paid on the 26th of April.

The company's next dividend payment will be €0.22 per share, on the back of last year when the company paid a total of €0.22 to shareholders. Based on the last year's worth of payments, Anora Group Oyj stock has a trailing yield of around 4.2% on the current share price of €5.30. If you buy this business for its dividend, you should have an idea of whether Anora Group Oyj's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Anora Group Oyj

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. Anora Group Oyj lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. 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. Luckily it paid out just 12% of its free cash flow last year.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Anora Group Oyj reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Anora Group Oyj's dividend payments per share have declined at 10% per year on average over the past five years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

We update our analysis on Anora Group Oyj every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is Anora Group Oyj worth buying for its dividend? It's hard to get used to Anora Group Oyj paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Anora Group Oyj is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

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 Anora Group Oyj. Our analysis shows 1 warning sign for Anora Group Oyj and you should be aware of it before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.