Read This Before Considering AX Real Estate p.l.c. (MTSE:AXR) For Its Upcoming €0.015 Dividend

Readers hoping to buy AX Real Estate p.l.c. (MTSE:AXR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase AX Real Estate's shares before the 16th of January in order to be eligible for the dividend, which will be paid on the 31st of January.

The company's next dividend payment will be €0.015 per share, and in the last 12 months, the company paid a total of €0.025 per share. Calculating the last year's worth of payments shows that AX Real Estate has a trailing yield of 4.8% on the current share price of €0.52. If you buy this business for its dividend, you should have an idea of whether AX Real Estate's dividend is reliable and sustainable. So we need to investigate whether AX Real Estate can afford its dividend, and if the dividend could grow.

See our latest analysis for AX Real Estate

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AX Real Estate paid out 103% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether AX Real Estate generated enough free cash flow to afford its dividend. It paid out 82% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and AX Real Estate fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit AX Real Estate paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke.

We'd also point out that AX Real Estate issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. AX Real Estate's dividend payments are broadly unchanged compared to where they were two years ago.

The Bottom Line

Is AX Real Estate worth buying for its dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of AX Real Estate's dividend merits.

If you're not too concerned about AX Real Estate's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 4 warning signs for AX Real Estate (of which 2 are concerning!) you should know about.

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.