Don't Buy Zwack Unicum Nyrt. (BUSE:ZWACK) For Its Next Dividend Without Doing These Checks

It looks like Zwack Unicum Nyrt. (BUSE:ZWACK) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Zwack Unicum Nyrt's shares before the 23rd of July in order to be eligible for the dividend, which will be paid on the 31st of July.

The company's next dividend payment will be Ft01400.00 per share, and in the last 12 months, the company paid a total of Ft1,400 per share. Based on the last year's worth of payments, Zwack Unicum Nyrt has a trailing yield of 5.4% on the current stock price of Ft026000.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Zwack Unicum Nyrt has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Zwack Unicum Nyrt

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. Last year Zwack Unicum Nyrt paid out 96% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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 105% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

As Zwack Unicum Nyrt's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.

Click here to see how much of its profit Zwack Unicum Nyrt paid out over the last 12 months.

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. With that in mind, we're encouraged by the steady growth at Zwack Unicum Nyrt, with earnings per share up 2.1% on average over the last five years. Minimal earnings growth, combined with concerningly high payout ratios suggests that Zwack Unicum Nyrt is unlikely to grow the dividend much in future, and indeed the payment could be vulnerable to a cut.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Zwack Unicum Nyrt has delivered an average of 6.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is Zwack Unicum Nyrt worth buying for its dividend? Zwack Unicum Nyrt is paying out an uncomfortably high percentage of both earnings and cash flow as dividends, although at least earnings per share are growing somewhat. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Zwack Unicum Nyrt.

Although, if you're still interested in Zwack Unicum Nyrt and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 1 warning sign for Zwack Unicum Nyrt you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.

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