Do These 3 Checks Before Buying Telematic Interactive Bulgaria EAD (BUL:TIB) For Its Upcoming Dividend

It looks like Telematic Interactive Bulgaria EAD (BUL:TIB) is about to go ex-dividend in the next four days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Telematic Interactive Bulgaria EAD's shares on or after the 4th of April will not receive the dividend, which will be paid on the 14th of April.

The company's upcoming dividend is лв0.35 a share, following on from the last 12 months, when the company distributed a total of лв0.73 per share to shareholders. Looking at the last 12 months of distributions, Telematic Interactive Bulgaria EAD has a trailing yield of approximately 3.3% on its current stock price of лв21.80. If you buy this business for its dividend, you should have an idea of whether Telematic Interactive Bulgaria EAD's dividend is reliable and sustainable. As a result, readers should always check whether Telematic Interactive Bulgaria EAD has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. A useful secondary check can be to evaluate whether Telematic Interactive Bulgaria EAD generated enough free cash flow to afford its dividend. Over the past year it paid out 190% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Telematic Interactive Bulgaria EAD does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Telematic Interactive Bulgaria EAD paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Telematic Interactive Bulgaria EAD's ability to maintain its dividend.

See our latest analysis for Telematic Interactive Bulgaria EAD

Click here to see how much of its profit Telematic Interactive Bulgaria EAD 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Telematic Interactive Bulgaria EAD's earnings per share have dropped 5.8% a year over the past three years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Telematic Interactive Bulgaria EAD's dividend payments per share have declined at 2.3% per year on average over the past three years, which is uninspiring. 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 Telematic Interactive Bulgaria EAD worth buying for its dividend? Telematic Interactive Bulgaria EAD's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. Bottom line: Telematic Interactive Bulgaria EAD has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Telematic Interactive Bulgaria EAD and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 1 warning sign with Telematic Interactive Bulgaria EAD and understanding them should be part of your investment process.

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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.