Enero Group Limited (ASX:EGG) Stock Goes Ex-Dividend In Just Two Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Enero Group Limited (ASX:EGG) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. This means that investors who purchase Enero Group's shares on or after the 19th of September will not receive the dividend, which will be paid on the 3rd of October.

The company's next dividend payment will be AU$0.02 per share, on the back of last year when the company paid a total of AU$0.04 to shareholders. Based on the last year's worth of payments, Enero Group has a trailing yield of 3.6% on the current stock price of AU$1.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Enero Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Enero Group reported a loss last year, so it's not great to see that it has continued paying a dividend. 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. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Enero Group was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last seven years, Enero Group has lifted its dividend by approximately 4.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Enero Group is keeping back more of its profits to grow the business.

Remember, you can always get a snapshot of Enero Group's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is Enero Group an attractive dividend stock, or better left on the shelf? It's hard to get used to Enero Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

In light of that, while Enero Group has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Enero Group has 2 warning signs we think you should be aware of.

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.