Don't Race Out To Buy Albena AD (BUL:ALB) Just Because It's Going Ex-Dividend

Readers hoping to buy Albena AD (BUL:ALB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Meaning, you will need to purchase Albena AD's shares before the 4th of July to receive the dividend, which will be paid on the 20th of August.

The company's next dividend payment will be лв0.13 per share, on the back of last year when the company paid a total of лв0.11 to shareholders. Based on the last year's worth of payments, Albena AD has a trailing yield of 0.4% on the current stock price of лв26.00. If you buy this business for its dividend, you should have an idea of whether Albena AD's dividend is reliable and sustainable. So we need to investigate whether Albena AD can afford its dividend, and if the dividend could grow.

See our latest analysis for Albena AD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Albena AD's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 3.2% of its cash flow last year.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Albena AD's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 33% 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. Albena AD has seen its dividend decline 17% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Is Albena AD an attractive dividend stock, or better left on the shelf? It's never great to see earnings per share declining, especially when a company is paying out -98% of its profit as dividends, which we feel is uncomfortably high. However, the cash payout ratio was much lower - good news from a dividend perspective - which makes us wonder why there is such a mis-match between income and cashflow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Albena AD.

With that in mind though, if the poor dividend characteristics of Albena AD don't faze you, it's worth being mindful of the risks involved with this business. To that end, you should learn about the 3 warning signs we've spotted with Albena AD (including 1 which makes us a bit uncomfortable).

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com