We Wouldn't Be Too Quick To Buy ELANA Agrocredit AD (BUL:EAC) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that ELANA Agrocredit AD (BUL:EAC) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase ELANA Agrocredit AD's shares on or after the 15th of April will not receive the dividend, which will be paid on the 20th of May.

The company's next dividend payment will be лв0.07292 per share, and in the last 12 months, the company paid a total of лв0.073 per share. Last year's total dividend payments show that ELANA Agrocredit AD has a trailing yield of 6.5% on the current share price of лв1.12. If you buy this business for its dividend, you should have an idea of whether ELANA Agrocredit AD's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for ELANA Agrocredit AD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, ELANA Agrocredit AD paid out 98% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. ELANA Agrocredit AD paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see how much of its profit ELANA Agrocredit AD paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about ELANA Agrocredit AD's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last nine years, ELANA Agrocredit AD has lifted its dividend by approximately 1.8% a year on average.

To Sum It Up

Should investors buy ELANA Agrocredit AD for the upcoming dividend? Earnings per share have not grown at all and ELANA Agrocredit AD is paying out an uncomfortably high percentage of its profit as dividends. ELANA Agrocredit AD doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Although, if you're still interested in ELANA Agrocredit AD and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 5 warning signs for ELANA Agrocredit AD (of which 3 can't be ignored!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.