Don't Race Out To Buy Poligrafici Printing S.p.A. (BIT:POPR) Just Because It's Going Ex-Dividend

It looks like Poligrafici Printing S.p.A. (BIT:POPR) is about to go ex-dividend in the next 3 days. 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. 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 Poligrafici Printing's shares before the 22nd of September in order to be eligible for the dividend, which will be paid on the 24th of September.

The company's next dividend payment will be €0.0075 per share, and in the last 12 months, the company paid a total of €0.03 per share. Last year's total dividend payments show that Poligrafici Printing has a trailing yield of 7.0% on the current share price of €0.43. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Poligrafici Printing paid out 116% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Poligrafici Printing's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

View our latest analysis for Poligrafici Printing

Click here to see how much of its profit Poligrafici Printing paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Poligrafici Printing's earnings per share have fallen at approximately 14% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Poligrafici Printing's dividend payments per share have declined at 12% per year on average over the past four years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Is Poligrafici Printing an attractive dividend stock, or better left on the shelf? It's not a great combination to see a company with earnings in decline and paying out 116% of its profits, which could imply the dividend may be at risk of being cut in the future. Yet cashflow was much stronger, which makes us wonder if there are some large timing issues in Poligrafici Printing's cash flows, or perhaps the company has written down some assets aggressively, reducing its income. It's not that we think Poligrafici Printing is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering Poligrafici Printing as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 3 warning signs for Poligrafici Printing that we strongly recommend you have a look at before investing in the company.

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.