Don't Buy AS Latvijas Juras medicinas centrs (MUN:UOM) For Its Next Dividend Without Doing These Checks

AS Latvijas Juras medicinas centrs (MUN:UOM) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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 AS Latvijas Juras medicinas centrs' shares on or after the 29th of November will not receive the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be €0.10 per share, and in the last 12 months, the company paid a total of €0.10 per share. Calculating the last year's worth of payments shows that AS Latvijas Juras medicinas centrs has a trailing yield of 0.9% on the current share price of €10.7. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for AS Latvijas Juras medicinas centrs

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AS Latvijas Juras medicinas centrs paid out 130% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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.

It's good to see that while AS Latvijas Juras medicinas centrs's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see how much of its profit AS Latvijas Juras medicinas centrs 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 fall far enough, the company could be forced to cut its dividend. AS Latvijas Juras medicinas centrs's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 34% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. AS Latvijas Juras medicinas centrs's dividend payments per share have declined at 21% per year on average over the past six 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid AS Latvijas Juras medicinas centrs? It's never great to see earnings per share declining, especially when a company is paying out 130% of its profit as dividends, which we feel is uncomfortably high. However, the cash payout ratio was much lower - good news from a dividend perspective - which makes us wonder why there is such a mis-match between income and cashflow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of AS Latvijas Juras medicinas centrs.

With that being said, if you're still considering AS Latvijas Juras medicinas centrs as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 2 warning signs we've spotted with AS Latvijas Juras medicinas centrs (including 1 which is concerning).

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.