Interested In Warpaint London's (LON:W7L) Upcoming UK£0.03 Dividend? You Have Three Days Left

It looks like Warpaint London PLC (LON:W7L) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Warpaint London investors that purchase the stock on or after the 9th of November will not receive the dividend, which will be paid on the 24th of November.

The company's next dividend payment will be UK£0.03 per share, and in the last 12 months, the company paid a total of UK£0.071 per share. Last year's total dividend payments show that Warpaint London has a trailing yield of 2.4% on the current share price of £3.1. If you buy this business for its dividend, you should have an idea of whether Warpaint London's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Warpaint London

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Warpaint London is paying out an acceptable 69% of its profit, a common payout level among most companies. 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 47% of its free cash flow in the past year.

It's positive to see that Warpaint London'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.

Click here to see how much of its profit Warpaint London 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. This is why it's a relief to see Warpaint London earnings per share are up 5.2% per annum over the last five years. Decent historical earnings per share growth suggests Warpaint London has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Warpaint London has delivered 31% dividend growth per year on average over the past six years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Warpaint London got what it takes to maintain its dividend payments? Earnings per share growth has been modest and Warpaint London paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, while it has some positive characteristics, we're not inclined to race out and buy Warpaint London today.

In light of that, while Warpaint London has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Warpaint London and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.