Dividend Investors: Don't Be Too Quick To Buy Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság (BUSE:ZWACK) For Its Upcoming Dividend

Readers hoping to buy Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság (BUSE:ZWACK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság's shares before the 22nd of July in order to receive the dividend, which the company will pay on the 30th of July.

The company's next dividend payment will be Ft01500.00 per share. Last year, in total, the company distributed Ft1,500 to shareholders. Calculating the last year's worth of payments shows that Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság has a trailing yield of 4.2% on the current share price of Ft035700.00. 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. Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság paid out 100% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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 109% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Cash is slightly more important than profit from a dividend perspective, but given Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.

View our latest analysis for Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság

Click here to see how much of its profit Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság's earnings per share have been growing at 12% a year for the past five years. We're a bit put out by the fact that Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság paid out virtually all of its earnings and cashflow as dividends over the last year. Earnings are growing at a decent clip, so this payout ratio may prove sustainable, but it's not great to see.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság's dividend payments per share have declined at 5.0% per year on average over the past 10 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.

Final Takeaway

Should investors buy Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság for the upcoming dividend? While it's nice to see earnings per share growing, we're curious about how Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság intends to continue growing, or maintain the dividend in a downturn given that it's paying out such a high percentage of its earnings and cashflow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that being said, if you're still considering Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság as an investment, you'll find it beneficial to know what risks this stock is facing. In terms of investment risks, we've identified 1 warning sign with Zwack Unicum Likoripari és Kereskedelmi Nyilvánosan Muködo Részvénytársaság and understanding them should be part of your investment process.

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.