Read This Before Considering AdVini S.A. (EPA:ALAVI) For Its Upcoming €0.35 Dividend

It looks like AdVini S.A. (EPA:ALAVI) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase AdVini's shares before the 26th of July in order to receive the dividend, which the company will pay on the 28th of July.

The company's next dividend payment will be €0.35 per share. Last year, in total, the company distributed €0.35 to shareholders. Calculating the last year's worth of payments shows that AdVini has a trailing yield of 1.7% on the current share price of €20.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for AdVini

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see AdVini paying out a modest 45% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last 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 AdVini paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. 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 discomforted by AdVini's 7.2% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AdVini has delivered 0.9% dividend growth per year on average over the past 10 years.

The Bottom Line

Should investors buy AdVini for the upcoming dividend? AdVini 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. To summarise, AdVini looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while AdVini looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that AdVini is showing 5 warning signs in our investment analysis, and 2 of those are a bit unpleasant...

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.