Is It Smart To Buy D4t4 Solutions Plc (LON:D4T4) Before It Goes Ex-Dividend?

Readers hoping to buy D4t4 Solutions Plc (LON:D4T4) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 10th of December will not receive this dividend, which will be paid on the 11th of January.

D4t4 Solutions's next dividend payment will be UK£0.0081 per share, and in the last 12 months, the company paid a total of UK£0.027 per share. Calculating the last year's worth of payments shows that D4t4 Solutions has a trailing yield of 1.1% on the current share price of £2.4. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for D4t4 Solutions

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see D4t4 Solutions paying out a modest 40% of its earnings. 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. Over the last year it paid out 52% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that D4t4 Solutions'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see D4t4 Solutions's earnings have been skyrocketing, up 33% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, D4t4 Solutions has increased its dividend at approximately 9.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has D4t4 Solutions got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, D4t4 Solutions paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks D4t4 Solutions is facing. For example, we've found 1 warning sign for D4t4 Solutions that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

When trading D4t4 Solutions or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.