Is It Smart To Buy Koncar - distributivni i specijalni transformatori d.d. (ZGSE:KODT) Before It Goes Ex-Dividend?

Readers hoping to buy Koncar - distributivni i specijalni transformatori d.d. (ZGSE:KODT) 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 13th of July will not receive this dividend, which will be paid on the 29th of July.

Koncar - distributivni i specijalni transformatori d.d's next dividend payment will be HRK37.66 per share, which looks like a nice increase on last year, when the company distributed a total of HRK32.54 to shareholders. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Koncar - distributivni i specijalni transformatori d.d

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. Fortunately Koncar - distributivni i specijalni transformatori d.d's payout ratio is modest, at just 35% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Koncar - distributivni i specijalni transformatori d.d'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 how much of its profit Koncar - distributivni i specijalni transformatori d.d 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Koncar - distributivni i specijalni transformatori d.d's earnings per share have been growing at 12% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, ten years ago, Koncar - distributivni i specijalni transformatori d.d has lifted its dividend by approximately 2.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Koncar - distributivni i specijalni transformatori d.d is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid Koncar - distributivni i specijalni transformatori d.d? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Koncar - distributivni i specijalni transformatori d.d, and we would prioritise taking a closer look at it.

So while Koncar - distributivni i specijalni transformatori d.d looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Koncar - distributivni i specijalni transformatori d.d you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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