It Might Not Be A Great Idea To Buy ELANA Agrocredit AD (BUL:EAC) For Its Next Dividend

By
Simply Wall St
Published
May 28, 2021
BUL:EAC
Source: Shutterstock

ELANA Agrocredit AD (BUL:EAC) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase ELANA Agrocredit AD's shares on or after the 2nd of June will not receive the dividend, which will be paid on the 5th of July.

The company's next dividend payment will be лв0.071 per share, on the back of last year when the company paid a total of лв0.071 to shareholders. Last year's total dividend payments show that ELANA Agrocredit AD has a trailing yield of 6.2% on the current share price of BGN1.14. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for ELANA Agrocredit AD

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. Last year, ELANA Agrocredit AD paid out 92% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

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

historic-dividend
BUL:EAC Historic Dividend May 29th 2021

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that ELANA Agrocredit AD's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last six years, ELANA Agrocredit AD has lifted its dividend by approximately 2.2% a year on average.

The Bottom Line

Has ELANA Agrocredit AD got what it takes to maintain its dividend payments? Earnings per share have not grown at all and ELANA Agrocredit AD is paying out an uncomfortably high percentage of its profit as dividends. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Although, if you're still interested in ELANA Agrocredit AD and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 2 warning signs for ELANA Agrocredit AD and you should be aware of them before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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