Dividend Investors: Don't Be Too Quick To Buy Robinson plc (LON:RBN) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Robinson plc (LON:RBN) is about to trade ex-dividend in the next three 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. 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 Robinson's shares on or after the 5th of June, you won't be eligible to receive the dividend, when it is paid on the 20th of June.

The company's next dividend payment will be UK£0.035 per share, on the back of last year when the company paid a total of UK£0.06 to shareholders. Calculating the last year's worth of payments shows that Robinson has a trailing yield of 4.7% on the current share price of UK£1.275. If you buy this business for its dividend, you should have an idea of whether Robinson'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.

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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. Robinson lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Robinson didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

Check out our latest analysis for Robinson

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Robinson was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Robinson has increased its dividend at approximately 1.8% a year on average.

Get our latest analysis on Robinson's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Robinson? It's hard to get used to Robinson paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering Robinson as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 2 warning signs for Robinson that we recommend you consider before investing in the business.

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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.