Don't Race Out To Buy Alexandria Group Oyj (HEL:ALEX) Just Because It's Going Ex-Dividend

Alexandria Group Oyj (HEL:ALEX) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Alexandria Group Oyj's shares before the 16th of September to receive the dividend, which will be paid on the 24th of September.

The company's next dividend payment will be €0.395 per share, on the back of last year when the company paid a total of €0.79 to shareholders. Looking at the last 12 months of distributions, Alexandria Group Oyj has a trailing yield of approximately 7.1% on its current stock price of €11.05. 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! We need to see whether the dividend is covered by earnings and if it's growing.

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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. Last year, Alexandria Group Oyj paid out 102% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

See our latest analysis for Alexandria Group Oyj

Click here to see how much of its profit Alexandria Group 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Alexandria Group Oyj's earnings per share have fallen at approximately 9.8% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, four years ago, Alexandria Group Oyj has lifted its dividend by approximately 6.2% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Alexandria Group Oyj is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

The Bottom Line

Is Alexandria Group Oyj an attractive dividend stock, or better left on the shelf? Earnings per share are in decline and Alexandria Group Oyj 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. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Alexandria Group Oyj despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Alexandria Group Oyj is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.