Is It Smart To Buy Eik fasteignafélag hf. (ICE:EIK) Before It Goes Ex-Dividend?

Readers hoping to buy Eik fasteignafélag hf. (ICE:EIK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Eik fasteignafélag hf's shares before the 31st of March in order to be eligible for the dividend, which will be paid on the 12th of April.

The upcoming dividend for Eik fasteignafélag hf is Kr0.59 per share, increased from last year's total dividends per share of Kr0.51. If you buy this business for its dividend, you should have an idea of whether Eik fasteignafélag hf's dividend is reliable and sustainable. As a result, readers should always check whether Eik fasteignafélag hf has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Eik fasteignafélag hf

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. Eik fasteignafélag hf paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 44% of its free cash flow as dividends, a comfortable payout level for most companies.

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 how much of its profit Eik fasteignafélag hf 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Eik fasteignafélag hf's earnings per share have been growing at 17% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

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, eight years ago, Eik fasteignafélag hf has lifted its dividend by approximately 15% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Eik fasteignafélag hf worth buying for its dividend? It's great that Eik fasteignafélag hf is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Eik fasteignafélag hf looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Eik fasteignafélag hf has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for Eik fasteignafélag hf (1 is a bit unpleasant!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.