Don't Race Out To Buy Alpha Trust Holdings S.A. (ATH:ATRUST) Just Because It's Going Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Alpha Trust Holdings S.A. (ATH:ATRUST) is about to go ex-dividend in just 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Alpha Trust Holdings' shares before the 27th of May in order to receive the dividend, which the company will pay on the 3rd of June.

The company's next dividend payment will be €0.578 per share, and in the last 12 months, the company paid a total of €0.58 per share. Looking at the last 12 months of distributions, Alpha Trust Holdings has a trailing yield of approximately 6.8% on its current stock price of €8.54. 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.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Alpha Trust Holdings paid out 109% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

View our latest analysis for Alpha Trust Holdings

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Alpha Trust Holdings's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Alpha Trust Holdings has lifted its dividend by approximately 11% a year on average.

The Bottom Line

Has Alpha Trust Holdings got what it takes to maintain its dividend payments? Alpha Trust Holdings has an uncomfortably high payout ratio, and its earnings have not grown at all. Alpha Trust Holdings 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.

Although, if you're still interested in Alpha Trust Holdings and want to know more, you'll find it very useful to know what risks this stock faces. For instance, we've identified 3 warning signs for Alpha Trust Holdings (1 is a bit concerning) you should be aware of.

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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.