Dalata Hotel Group plc (ISE:DHG) Is About To Go Ex-Dividend, And It Pays A 3.1% Yield

Dalata Hotel Group plc (ISE:DHG) is about to trade ex-dividend in the next 2 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Dalata Hotel Group investors that purchase the stock on or after the 12th of September will not receive the dividend, which will be paid on the 4th of October.

The company's next dividend payment will be €0.041 per share, on the back of last year when the company paid a total of €0.12 to shareholders. Based on the last year's worth of payments, Dalata Hotel Group stock has a trailing yield of around 3.1% on the current share price of €3.895. If you buy this business for its dividend, you should have an idea of whether Dalata Hotel Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Dalata Hotel Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Dalata Hotel Group's payout ratio is modest, at just 32% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Dalata Hotel Group's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Dalata Hotel Group has delivered 12% dividend growth per year on average over the past six years.

To Sum It Up

Is Dalata Hotel Group an attractive dividend stock, or better left on the shelf? While it's not great to see that earnings per share are effectively flat over the six-year period we checked, at least the payout ratios are low and conservative. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Dalata Hotel Group's dividend merits.

In light of that, while Dalata Hotel Group has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Dalata Hotel Group 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.