Just Three Days Till Teleste Corporation (HEL:TLT1V) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Teleste Corporation (HEL:TLT1V) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Teleste's shares on or after the 7th of April, you won't be eligible to receive the dividend, when it is paid on the 19th of April.

The company's upcoming dividend is €0.14 a share, following on from the last 12 months, when the company distributed a total of €0.14 per share to shareholders. Looking at the last 12 months of distributions, Teleste has a trailing yield of approximately 2.9% on its current stock price of €4.77. 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.

View our latest analysis for Teleste

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. Fortunately Teleste's payout ratio is modest, at just 36% 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 36% 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.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Teleste's earnings per share have dropped 9.8% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Teleste's dividend payments are broadly unchanged compared to where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Final Takeaway

Is Teleste worth buying for its dividend? Teleste 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. All things considered, we are not particularly enthused about Teleste from a dividend perspective.

On that note, you'll want to research what risks Teleste is facing. For example - Teleste has 3 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.