Here's Why We're Wary Of Buying LapWall Oyj's (HEL:LAPWALL) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that LapWall Oyj (HEL:LAPWALL) is about to go ex-dividend in just four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase LapWall Oyj's shares on or after the 13th of March, you won't be eligible to receive the dividend, when it is paid on the 21st of March.

The company's next dividend payment will be €0.13 per share, on the back of last year when the company paid a total of €0.13 to shareholders. Based on the last year's worth of payments, LapWall Oyj stock has a trailing yield of around 4.2% on the current share price of €3.11. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for LapWall Oyj

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. LapWall Oyj paid out 74% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution.

Click here to see how much of its profit LapWall Oyj 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. From this viewpoint, it's unfortunate that earnings per share have declined 14% over the last year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. LapWall Oyj has seen its dividend decline 3.6% per annum on average over the past two 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.

The Bottom Line

Is LapWall Oyj an attractive dividend stock, or better left on the shelf? It's definitely not great to see earnings per share shrinking. The company paid out an acceptable percentage of its income, but an uncomfortably high percentage of its cash flow over the past year. It's not that we think LapWall Oyj is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering LapWall Oyj as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 6 warning signs for LapWall Oyj (of which 1 doesn't sit too well with us!) you should know about.

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.