Why It Might Not Make Sense To Buy Wynnstay Properties Plc (LON:WSP) For Its Upcoming Dividend

It looks like Wynnstay Properties Plc (LON:WSP) is about to go ex-dividend in the next three days. Investors can purchase shares before the 3rd of December in order to be eligible for this dividend, which will be paid on the 18th of December.

Wynnstay Properties's next dividend payment will be UK£0.08 per share, and in the last 12 months, the company paid a total of UK£0.15 per share. Based on the last year's worth of payments, Wynnstay Properties stock has a trailing yield of around 2.6% on the current share price of £5.75. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Wynnstay Properties

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wynnstay Properties's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Wynnstay Properties 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. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.

Click here to see how much of its profit Wynnstay Properties 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Wynnstay Properties 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Wynnstay Properties has delivered 3.6% dividend growth per year on average over the past 10 years.

We update our analysis on Wynnstay Properties every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Has Wynnstay Properties got what it takes to maintain its dividend payments? It's hard to get used to Wynnstay Properties paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Wynnstay Properties.

Although, if you're still interested in Wynnstay Properties and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 5 warning signs for Wynnstay Properties (2 can't be ignored!) that deserve your attention before investing in the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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