Is It Smart To Buy Kemira Oyj (HEL:KEMIRA) Before It Goes Ex-Dividend?

Kemira Oyj (HEL:KEMIRA) stock is about to trade ex-dividend in couple of days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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 Kemira Oyj's shares before the 21st of March to receive the dividend, which will be paid on the 3rd of April.

The company's next dividend payment will be €0.37 per share. Last year, in total, the company distributed €0.74 to shareholders. Calculating the last year's worth of payments shows that Kemira Oyj has a trailing yield of 3.4% on the current share price of €21.84. 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 Kemira Oyj has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Kemira Oyj

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Kemira Oyj's payout ratio is modest, at just 46% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 33% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Kemira Oyj's earnings per share have been growing at 18% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Kemira Oyj has increased its dividend at approximately 3.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Kemira Oyj is keeping back more of its profits to grow the business.

The Bottom Line

Has Kemira Oyj got what it takes to maintain its dividend payments? Kemira Oyj has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Kemira Oyj looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Ever wonder what the future holds for Kemira Oyj? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.