AS Harju Elekter (TAL:HAE1T) Could Be A Buy For Its Upcoming Dividend

AS Harju Elekter (TAL:HAE1T) stock is about to trade ex-dividend in three days. The ex-dividend date generally occurs two days 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 can take two business days or more to settle. In other words, investors can purchase AS Harju Elekter's shares before the 20th of May in order to be eligible for the dividend, which will be paid on the 28th of May.

The company's next dividend payment will be €0.15 per share, and in the last 12 months, the company paid a total of €0.15 per share. Last year's total dividend payments show that AS Harju Elekter has a trailing yield of 3.1% on the current share price of €4.86. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. AS Harju Elekter paid out 51% of its earnings to investors last year, a normal payout level for most businesses. 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. The good news is it paid out just 13% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for AS Harju Elekter

Click here to see how much of its profit AS Harju Elekter paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, AS Harju Elekter's earnings per share have been growing at 16% a year for the past five years. AS Harju Elekter is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the AS Harju Elekter dividends are largely the same as they were 10 years ago.

Final Takeaway

Should investors buy AS Harju Elekter for the upcoming dividend? We like AS Harju Elekter's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. AS Harju Elekter looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Want to learn more about AS Harju Elekter's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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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.