Don't Buy i2S SA (EPA:ALI2S) For Its Next Dividend Without Doing These Checks

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 i2S SA (EPA:ALI2S) is about to go ex-dividend in just 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, i2S investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 2nd of June.

The company's next dividend payment will be €0.11 per share. Last year, in total, the company distributed €0.11 to shareholders. Last year's total dividend payments show that i2S has a trailing yield of 1.6% on the current share price of €6.70. If you buy this business for its dividend, you should have an idea of whether i2S's dividend is reliable and sustainable. So we need to investigate whether i2S can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. i2S distributed an unsustainably high 160% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.

View our latest analysis for i2S

Click here to see how much of its profit i2S paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at i2S, with earnings per share up 4.1% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. i2S's dividend payments per share have declined at 7.7% per year on average over the past three years, which is uninspiring. i2S is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is i2S worth buying for its dividend? i2S has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

So if you're still interested in i2S despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 4 warning signs for i2S you should know about.

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.