Don't Race Out To Buy Investeringsselskabet Luxor A/S (CPH:LUXOR B) Just Because It's Going Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Investeringsselskabet Luxor A/S (CPH:LUXOR B) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Investeringsselskabet Luxor's shares on or after the 30th of January, you won't be eligible to receive the dividend, when it is paid on the 1st of February.

The company's next dividend payment will be kr.50.00 per share, and in the last 12 months, the company paid a total of kr.50.00 per share. Looking at the last 12 months of distributions, Investeringsselskabet Luxor has a trailing yield of approximately 7.2% on its current stock price of kr.695.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Investeringsselskabet Luxor can afford its dividend, and if the dividend could grow.

View our latest analysis for Investeringsselskabet Luxor

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. Investeringsselskabet Luxor distributed an unsustainably high 163% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

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

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. This is why it's a relief to see Investeringsselskabet Luxor earnings per share are up 5.6% per annum over the last 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, Investeringsselskabet Luxor has lifted its dividend by approximately 24% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Investeringsselskabet Luxor? While we like that its earnings are growing somewhat, we're not enamored that it's paying out 163% of last year's earnings. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

So if you're still interested in Investeringsselskabet Luxor despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. We've identified 3 warning signs with Investeringsselskabet Luxor (at least 2 which are a bit unpleasant), and understanding them should be part of your investment process.

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.