Don't Race Out To Buy Vátryggingafélag Íslands hf. (ICE:VIS) Just Because It's Going Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Vátryggingafélag Íslands hf. (ICE:VIS) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Vátryggingafélag Íslands hf's shares before the 22nd of March in order to receive the dividend, which the company will pay on the 2nd of April.

The company's upcoming dividend is Kr00.52 a share, following on from the last 12 months, when the company distributed a total of Kr0.52 per share to shareholders. Based on the last year's worth of payments, Vátryggingafélag Íslands hf stock has a trailing yield of around 2.9% on the current share price of Kr018.10. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Vátryggingafélag Íslands hf can afford its dividend, and if the dividend could grow.

See our latest analysis for Vátryggingafélag Íslands hf

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vátryggingafélag Íslands hf paid out 54% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Vátryggingafélag Íslands hf paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Vátryggingafélag Íslands hf's flat earnings 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. Vátryggingafélag Íslands hf's dividend payments per share have declined at 3.3% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

From a dividend perspective, should investors buy or avoid Vátryggingafélag Íslands hf? Vátryggingafélag Íslands hf's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. Vátryggingafélag Íslands hf doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

So if you're still interested in Vátryggingafélag Íslands hf despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 3 warning signs for Vátryggingafélag Íslands hf and you should be aware of them before buying any shares.

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.