It looks like KRUK Spólka Akcyjna (WSE:KRU) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 4th of September, you won’t be eligible to receive this dividend, when it is paid on the 14th of September.
KRUK Spólka Akcyjna’s next dividend payment will be zł5.00 per share, on the back of last year when the company paid a total of zł5.00 to shareholders. Based on the last year’s worth of payments, KRUK Spólka Akcyjna has a trailing yield of 3.4% on the current stock price of PLN147. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether KRUK Spólka Akcyjna can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Last year KRUK Spólka Akcyjna paid out 105% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
Generally, the higher a company’s payout ratio, the more the dividend is at risk of being reduced.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re discomforted by KRUK Spólka Akcyjna’s 12% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. KRUK Spólka Akcyjna has delivered 27% dividend growth per year on average over the past five years. That’s intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. KRUK Spólka Akcyjna is already paying out a high percentage of its income, so without earnings growth, we’re doubtful of whether this dividend will grow much in the future.
The Bottom Line
Should investors buy KRUK Spólka Akcyjna for the upcoming dividend? Earnings per share are in decline and KRUK Spólka Akcyjna is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It’s not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
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 KRUK Spólka Akcyjna. To that end, you should learn about the 4 warning signs we’ve spotted with KRUK Spólka Akcyjna (including 1 which is a bit concerning).
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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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