Dividend Investors: Don't Be Too Quick To Buy Panostaja Oyj (HEL:PNA1V) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Panostaja Oyj (HEL:PNA1V) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 8th of February in order to be eligible for this dividend, which will be paid on the 16th of February.

Panostaja Oyj's upcoming dividend is €0.03 a share, following on from the last 12 months, when the company distributed a total of €0.03 per share to shareholders. Calculating the last year's worth of payments shows that Panostaja Oyj has a trailing yield of 3.7% on the current share price of €0.816. If you buy this business for its dividend, you should have an idea of whether Panostaja Oyj's dividend is reliable and sustainable. So we need to investigate whether Panostaja Oyj can afford its dividend, and if the dividend could grow.

View our latest analysis for Panostaja Oyj

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. Panostaja Oyj lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Panostaja Oyj was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Panostaja Oyj has seen its dividend decline 5.0% per annum on average over the past 10 years, which is not great to see. 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.

We update our analysis on Panostaja Oyj every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is Panostaja Oyj an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Panostaja Oyj. Every company has risks, and we've spotted 2 warning signs for Panostaja Oyj you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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