Is It Smart To Buy Fazerles AD (BUL:FZLS) Before It Goes Ex-Dividend?

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 Fazerles AD (BUL:FZLS) is about to go ex-dividend in just four days. The ex-dividend date occurs one day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Fazerles AD's shares on or after the 27th of June, you won't be eligible to receive the dividend, when it is paid on the 7th of August.

The company's next dividend payment will be лв1.00 per share. Last year, in total, the company distributed лв1.00 to shareholders. Looking at the last 12 months of distributions, Fazerles AD has a trailing yield of approximately 5.4% on its current stock price of BGN18.4. If you buy this business for its dividend, you should have an idea of whether Fazerles AD's dividend is reliable and sustainable. So we need to investigate whether Fazerles AD can afford its dividend, and if the dividend could grow.

See our latest analysis for Fazerles 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. Fortunately Fazerles AD's payout ratio is modest, at just 40% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Fazerles AD's earnings have been skyrocketing, up 64% per annum 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. In the last 10 years, Fazerles AD has lifted its dividend by approximately 2.9% a year on average. 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 Fazerles AD got what it takes to maintain its dividend payments? We like that Fazerles 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in Fazerles AD for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 5 warning signs for Fazerles AD (3 make us uncomfortable!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.