Do These 3 Checks Before Buying IVS Group S.A. (BIT:IVS) For Its Upcoming Dividend

IVS Group S.A. (BIT:IVS) stock is about to trade ex-dividend in 3 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 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. Accordingly, IVS Group investors that purchase the stock on or after the 24th of July will not receive the dividend, which will be paid on the 26th of July.

The company's next dividend payment will be €0.11 per share, on the back of last year when the company paid a total of €0.11 to shareholders. Looking at the last 12 months of distributions, IVS Group has a trailing yield of approximately 2.3% on its current stock price of €4.78. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for IVS Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. IVS Group distributed an unsustainably high 121% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether IVS Group generated enough free cash flow to afford its dividend. IVS Group paid out more free cash flow than it generated - 159%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Cash is slightly more important than profit from a dividend perspective, but given IVS Group's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. IVS Group's earnings per share have fallen at approximately 28% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

We'd also point out that IVS Group issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. IVS Group has seen its dividend decline 1.3% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Should investors buy IVS Group for the upcoming dividend? Not only are earnings per share declining, but IVS Group is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders as dividends. Unless there are grounds to believe a turnaround is imminent, this is one of the least attractive dividend stocks under this analysis. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of IVS Group.

With that being said, if you're still considering IVS Group as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 3 warning signs for IVS Group 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.