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 Vincit Oyj (HEL:VINCIT) is about to go ex-dividend in just 2 days. Investors can purchase shares before the 24th of March in order to be eligible for this dividend, which will be paid on the 1st of April.
Vincit Oyj's next dividend payment will be €0.18 per share, on the back of last year when the company paid a total of €0.18 to shareholders. Looking at the last 12 months of distributions, Vincit Oyj has a trailing yield of approximately 2.0% on its current stock price of €9.12. If you buy this business for its dividend, you should have an idea of whether Vincit Oyj's dividend is reliable and sustainable. So we need to investigate whether Vincit Oyj can afford its dividend, and if the dividend could grow.
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. That's why it's good to see Vincit Oyj paying out a modest 50% of its earnings. A useful secondary check can be to evaluate whether Vincit Oyj generated enough free cash flow to afford its dividend. It paid out 17% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Vincit Oyj's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Vincit Oyj's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 71% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, Vincit Oyj has lifted its dividend by approximately 11% a year on average.
To Sum It Up
Is Vincit Oyj an attractive dividend stock, or better left on the shelf? Vincit Oyj has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, while it has some positive characteristics, we're not inclined to race out and buy Vincit Oyj today.
So while Vincit Oyj looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Vincit Oyj you should be aware of.
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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