Why You Might Be Interested In Zaharni Zavodi AD (BUL:ZHZA) For Its Upcoming Dividend

By
Simply Wall St
Published
June 30, 2021
BUL:ZHZA
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 Zaharni Zavodi AD (BUL:ZHZA) 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. 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 Zaharni Zavodi AD's shares on or after the 6th of July will not receive the dividend, which will be paid on the 30th of July.

The upcoming dividend for Zaharni Zavodi AD is лв0.16 per share, increased from last year's total dividends per share of лв0.014. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Zaharni Zavodi AD can afford its dividend, and if the dividend could grow.

View our latest analysis for Zaharni Zavodi AD

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. Zaharni Zavodi AD paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Zaharni Zavodi AD paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

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

historic-dividend
BUL:ZHZA Historic Dividend July 1st 2021

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Zaharni Zavodi AD's earnings per share have been growing at 14% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Zaharni Zavodi AD has delivered 2.0% dividend growth per year on average over the past two years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Has Zaharni Zavodi AD got what it takes to maintain its dividend payments? We like that Zaharni Zavodi AD has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Zaharni Zavodi AD's dividend merits.

While it's tempting to invest in Zaharni Zavodi AD for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Zaharni Zavodi AD (1 shouldn't be ignored) you should be aware of.

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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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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