Here's Why We're Wary Of Buying Alantra Partners' (BME:ALNT) For Its Upcoming Dividend

It looks like Alantra Partners, S.A. (BME:ALNT) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is two business days 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 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. Thus, you can purchase Alantra Partners' shares before the 8th of May in order to receive the dividend, which the company will pay on the 12th of May.

The company's next dividend payment will be €0.1215 per share, on the back of last year when the company paid a total of €0.15 to shareholders. Last year's total dividend payments show that Alantra Partners has a trailing yield of 1.7% on the current share price of €8.64. If you buy this business for its dividend, you should have an idea of whether Alantra Partners's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Our free stock report includes 1 warning sign investors should be aware of before investing in Alantra Partners. Read for free now.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

View our latest analysis for Alantra Partners

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Alantra Partners's 29% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Alantra Partners has seen its dividend decline 14% 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.

To Sum It Up

Has Alantra Partners got what it takes to maintain its dividend payments? We're not overly enthused to see Alantra Partners's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that being said, if you're still considering Alantra Partners as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 1 warning sign for Alantra Partners and you should be aware of this before buying any shares.

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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.