Do These 3 Checks Before Buying Castellana Properties Socimi, S.A. (BME:YCPS) For Its Upcoming Dividend

It looks like Castellana Properties Socimi, S.A. (BME:YCPS) is about to go ex-dividend in the next 3 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. 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. This means that investors who purchase Castellana Properties Socimi's shares on or after the 3rd of December will not receive the dividend, which will be paid on the 5th of December.

The company's upcoming dividend is €0.0702119 a share, following on from the last 12 months, when the company distributed a total of €0.30 per share to shareholders. Based on the last year's worth of payments, Castellana Properties Socimi has a trailing yield of 4.3% on the current stock price of €7.00. 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 Castellana Properties Socimi has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Castellana Properties Socimi

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. Castellana Properties Socimi distributed an unsustainably high 127% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see how much of its profit Castellana Properties Socimi paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Castellana Properties Socimi's 19% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Castellana Properties Socimi's dividend payments per share have declined at 12% per year on average over the past six years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Is Castellana Properties Socimi an attractive dividend stock, or better left on the shelf? Earnings per share are in decline and Castellana Properties Socimi is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. Castellana Properties Socimi doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that being said, if you're still considering Castellana Properties Socimi as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 3 warning signs for Castellana Properties Socimi (1 is a bit 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.