Should You Buy AS Tallink Grupp (TAL:TAL1T) For Its Upcoming Dividend?

It looks like AS Tallink Grupp (TAL:TAL1T) is about to go ex-dividend in the next three 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. 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. In other words, investors can purchase AS Tallink Grupp's shares before the 19th of June in order to be eligible for the dividend, which will be paid on the 3rd of July.

The company's next dividend payment will be €0.06 per share, and in the last 12 months, the company paid a total of €0.06 per share. Last year's total dividend payments show that AS Tallink Grupp has a trailing yield of 8.1% on the current share price of €0.743. 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.

View our latest analysis for AS Tallink Grupp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AS Tallink Grupp paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.

Click here to see how much of its profit AS Tallink Grupp 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see AS Tallink Grupp's earnings per share have risen 14% per annum over the last five years. AS Tallink Grupp has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some 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. In the last 10 years, AS Tallink Grupp has lifted its dividend by approximately 7.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid AS Tallink Grupp? Earnings per share are growing at an attractive rate, and AS Tallink Grupp is paying out a bit over half its profits. Overall, AS Tallink Grupp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while AS Tallink Grupp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - AS Tallink Grupp has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com