Do These 3 Checks Before Buying Harmony Energy Income Trust Plc (LON:HEIT) For Its Upcoming Dividend

Readers hoping to buy Harmony Energy Income Trust Plc (LON:HEIT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Harmony Energy Income Trust's shares before the 7th of December to receive the dividend, which will be paid on the 22nd of December.

The company's next dividend payment will be UK£0.02 per share, on the back of last year when the company paid a total of UK£0.08 to shareholders. Last year's total dividend payments show that Harmony Energy Income Trust has a trailing yield of 9.9% on the current share price of £0.807. If you buy this business for its dividend, you should have an idea of whether Harmony Energy Income Trust's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Harmony Energy Income Trust

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Harmony Energy Income Trust paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Harmony Energy Income Trust paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously.

Unfortunately Harmony Energy Income Trust has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Harmony Energy Income Trust an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Harmony Energy Income Trust's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Harmony Energy Income Trust doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Harmony Energy Income Trust don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 3 warning signs for Harmony Energy Income Trust that you should be aware of before investing in their shares.

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.