Is It Smart To Buy Ovaro Kiinteistösijoitus Oyj (HEL:OVARO) Before It Goes Ex-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 Ovaro Kiinteistösijoitus Oyj (HEL:OVARO) is about to go ex-dividend in just 4 days. The ex-dividend date is usually set to be one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Ovaro Kiinteistösijoitus Oyj's shares before the 12th of April in order to receive the dividend, which the company will pay on the 22nd of April.

The company's next dividend payment will be €0.13 per share. Last year, in total, the company distributed €0.13 to shareholders. Based on the last year's worth of payments, Ovaro Kiinteistösijoitus Oyj stock has a trailing yield of around 3.5% on the current share price of €3.76. If you buy this business for its dividend, you should have an idea of whether Ovaro Kiinteistösijoitus Oyj's dividend is reliable and sustainable. So we need to investigate whether Ovaro Kiinteistösijoitus Oyj can afford its dividend, and if the dividend could grow.

See our latest analysis for Ovaro Kiinteistösijoitus 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. Ovaro Kiinteistösijoitus Oyj paid out a comfortable 43% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out an unsustainably high 439% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Ovaro Kiinteistösijoitus Oyj is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

Ovaro Kiinteistösijoitus Oyj paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Ovaro Kiinteistösijoitus Oyj to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Ovaro Kiinteistösijoitus 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Ovaro Kiinteistösijoitus Oyj has grown its earnings rapidly, up 34% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ovaro Kiinteistösijoitus Oyj's dividend payments per share have declined at 19% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Has Ovaro Kiinteistösijoitus Oyj got what it takes to maintain its dividend payments? We like that Ovaro Kiinteistösijoitus Oyj has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. All things considered, we are not particularly enthused about Ovaro Kiinteistösijoitus Oyj from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Ovaro Kiinteistösijoitus Oyj is showing 4 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.