Don't Buy Infas Holding AG (FRA:IFS) For Its Next Dividend Without Doing These Checks

Infas Holding AG (FRA:IFS) stock is about to trade ex-dividend in three 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. 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 Infas Holding's shares on or after the 26th of June, you won't be eligible to receive the dividend, when it is paid on the 28th of June.

The company's next dividend payment will be €0.05 per share, and in the last 12 months, the company paid a total of €0.05 per share. Looking at the last 12 months of distributions, Infas Holding has a trailing yield of approximately 1.3% on its current stock price of €3.80. 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! As a result, readers should always check whether Infas Holding has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Infas Holding

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Infas Holding's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. 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. Luckily it paid out just 6.2% of its free cash flow last year.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Infas Holding 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Infas Holding has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. 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.

We update our analysis on Infas Holding every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Should investors buy Infas Holding for the upcoming dividend? 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." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Infas Holding.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Infas Holding. To help with this, we've discovered 3 warning signs for Infas Holding (1 is concerning!) that you ought to be aware of before buying the shares.

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