Dividend Investors: Don't Be Too Quick To Buy Athos Immobilien AG (VIE:ATH) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Athos Immobilien AG (VIE:ATH) is about to trade ex-dividend in the next two 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Athos Immobilien's shares before the 17th of July in order to receive the dividend, which the company will pay on the 19th of July.

The company's next dividend payment will be €1.40 per share. Last year, in total, the company distributed €1.40 to shareholders. Based on the last year's worth of payments, Athos Immobilien has a trailing yield of 2.9% on the current stock price of €47.6. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Athos Immobilien

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. Athos Immobilien paid out a disturbingly high 223% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business.

Click here to see how much of its profit Athos Immobilien paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. 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 Athos Immobilien's 21% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Athos Immobilien has lifted its dividend by approximately 13% a year on average. 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. Athos Immobilien is already paying out 223% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

The Bottom Line

Has Athos Immobilien got what it takes to maintain its dividend payments? Earnings per share are in decline and Athos Immobilien is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Athos Immobilien despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. We've identified 5 warning signs with Athos Immobilien (at least 1 which makes us a bit uncomfortable), and understanding them should be part of your investment process.

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.