Don't Buy Trace Group Hold PLC (BUL:T57) For Its Next Dividend Without Doing These Checks

By
Simply Wall St
Published
July 08, 2021
BUL:T57
Source: Shutterstock

Trace Group Hold PLC (BUL:T57) is about to trade ex-dividend in the next three 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Trace Group Hold's shares on or after the 13th of July will not receive the dividend, which will be paid on the 23rd of August.

The company's upcoming dividend is лв0.20 a share, following on from the last 12 months, when the company distributed a total of лв0.20 per share to shareholders. Last year's total dividend payments show that Trace Group Hold has a trailing yield of 5.3% on the current share price of BGN3.8. 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 investigate whether Trace Group Hold can afford its dividend, and if the dividend could grow.

View our latest analysis for Trace Group Hold

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Trace Group Hold paid out more than half (64%) of its earnings last year, which is a regular payout ratio for most companies.

Click here to see how much of its profit Trace Group Hold paid out over the last 12 months.

historic-dividend
BUL:T57 Historic Dividend July 9th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Trace Group Hold's earnings are down 4.8% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Trace Group Hold has lifted its dividend by approximately 24% a year on average. 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

Is Trace Group Hold an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Trace Group Hold's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. We're unconvinced on the company's merits, and think there might be better opportunities out there.

However if you're still interested in Trace Group Hold as a potential investment, you should definitely consider some of the risks involved with Trace Group Hold. Our analysis shows 3 warning signs for Trace Group Hold and you should be aware of them before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top 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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