It Might Not Be A Great Idea To Buy Miko NV (EBR:MIKO) For Its Next Dividend

It looks like Miko NV (EBR:MIKO) is about to go ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Miko investors that purchase the stock on or after the 18th of June will not receive the dividend, which will be paid on the 20th of June.

The company's next dividend payment will be €1.309 per share. Last year, in total, the company distributed €1.87 to shareholders. Calculating the last year's worth of payments shows that Miko has a trailing yield of 3.7% on the current share price of €50.00. 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 Miko can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Miko paid out 73% of its earnings to investors last year, a normal payout level for most businesses.

Check out our latest analysis for Miko

Click here to see how much of its profit Miko 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. If earnings fall far enough, the company could be forced to cut its dividend. Miko's earnings per share have fallen at approximately 19% a year over the previous 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. Miko has delivered an average of 3.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Should investors buy Miko for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. It's not that we think Miko is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering Miko as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 5 warning signs for Miko (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.

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.