Elinoil Hellenic Petroleum Company S.A. (ATH:ELIN) Is About To Go Ex-Dividend, And It Pays A 4.1% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Elinoil Hellenic Petroleum Company S.A. (ATH:ELIN) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Accordingly, Elinoil Hellenic Petroleum investors that purchase the stock on or after the 14th of July will not receive the dividend, which will be paid on the 18th of July.

The company's next dividend payment will be €0.1366 per share, on the back of last year when the company paid a total of €0.11 to shareholders. Looking at the last 12 months of distributions, Elinoil Hellenic Petroleum has a trailing yield of approximately 4.1% on its current stock price of €2.61. 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.

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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. Elinoil Hellenic Petroleum is paying out an acceptable 53% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Elinoil Hellenic Petroleum generated enough free cash flow to afford its dividend. Elinoil Hellenic Petroleum paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

View our latest analysis for Elinoil Hellenic Petroleum

Click here to see how much of its profit Elinoil Hellenic Petroleum 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. That's why it's comforting to see Elinoil Hellenic Petroleum's earnings have been skyrocketing, up 24% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Elinoil Hellenic Petroleum's dividend payments per share have declined at 4.3% per year on average over the past nine years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

From a dividend perspective, should investors buy or avoid Elinoil Hellenic Petroleum? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Elinoil Hellenic Petroleum paid out a much higher percentage of its free cash flow, which makes us uncomfortable. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you're not too concerned about Elinoil Hellenic Petroleum's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Be aware that Elinoil Hellenic Petroleum is showing 4 warning signs in our investment analysis, and 2 of those shouldn't be ignored...

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.