Why It Might Not Make Sense To Buy eQ Oyj (HEL:EQV1V) 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 eQ Oyj (HEL:EQV1V) is about to go ex-dividend in just four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase eQ Oyj's shares on or after the 26th of March will not receive the dividend, which will be paid on the 3rd of April.

The company's next dividend payment will be €0.33 per share. Last year, in total, the company distributed €0.66 to shareholders. Based on the last year's worth of payments, eQ Oyj has a trailing yield of 5.9% on the current stock price of €11.20. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether eQ Oyj has been able to grow its dividends, or if the dividend might be cut.

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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. eQ Oyj paid out 99% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

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.

View our latest analysis for eQ Oyj

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at eQ Oyj, with earnings per share up 3.7% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, eQ Oyj has lifted its dividend by approximately 16% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy eQ Oyj for the upcoming dividend? While we like that its earnings are growing somewhat, we're not enamored that it's paying out 99% of last year's earnings. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that being said, if you're still considering eQ Oyj as an investment, you'll find it beneficial to know what risks this stock is facing. In terms of investment risks, we've identified 2 warning signs with eQ Oyj and understanding them should be part of your investment process.

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.