Hydraulic Elements and Systems AD (BUL:HES) Could Be A Buy For Its Upcoming Dividend

By
Simply Wall St
Published
May 20, 2021
BUL:HES
Source: Shutterstock

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 Hydraulic Elements and Systems AD (BUL:HES) is about to go ex-dividend in just four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Hydraulic Elements and Systems AD's shares before the 26th of May in order to receive the dividend, which the company will pay on the 7th of July.

The company's upcoming dividend is лв0.26 a share, following on from the last 12 months, when the company distributed a total of лв0.26 per share to shareholders. Based on the last year's worth of payments, Hydraulic Elements and Systems AD has a trailing yield of 4.7% on the current stock price of BGN5.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Hydraulic Elements and Systems AD has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Hydraulic Elements and Systems AD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

Click here to see how much of its profit Hydraulic Elements and Systems AD paid out over the last 12 months.

historic-dividend
BUL:HES Historic Dividend May 21st 2021

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Hydraulic Elements and Systems AD earnings per share are up 8.5% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hydraulic Elements and Systems AD has delivered an average of 26% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Hydraulic Elements and Systems AD? Hydraulic Elements and Systems AD has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We think this is a pretty attractive combination, and would be interested in investigating Hydraulic Elements and Systems AD more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for Hydraulic Elements and Systems AD that we recommend you consider before investing in the business.

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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