Don't Buy Andrew Peller Limited (TSE:ADW.A) For Its Next Dividend Without Doing These Checks

Andrew Peller Limited (TSE:ADW.A) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Andrew Peller's shares on or after the 28th of June, you won't be eligible to receive the dividend, when it is paid on the 12th of July.

The company's next dividend payment will be CA$0.0615 per share. Last year, in total, the company distributed CA$0.25 to shareholders. Based on the last year's worth of payments, Andrew Peller has a trailing yield of 6.5% on the current stock price of CA$3.79. If you buy this business for its dividend, you should have an idea of whether Andrew Peller's dividend is reliable and sustainable. So we need to investigate whether Andrew Peller can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Andrew Peller

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. Andrew Peller paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 46% of its free cash flow in the past year.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Andrew Peller reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Andrew Peller has delivered 6.3% dividend growth per year on average over the past 10 years.

Remember, you can always get a snapshot of Andrew Peller's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Andrew Peller an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Andrew Peller is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that in mind though, if the poor dividend characteristics of Andrew Peller don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 3 warning signs for Andrew Peller that we strongly recommend you have a look at before investing in the company.

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