Do These 3 Checks Before Buying Wiit S.p.A. (BIT:WIIT) For Its Upcoming Dividend

By
Simply Wall St
Published
April 21, 2022
BIT:WIIT
Source: Shutterstock

Wiit S.p.A. (BIT:WIIT) stock is about to trade ex-dividend in three days. The ex-dividend date occurs one day 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. Therefore, if you purchase Wiit's shares on or after the 25th of April, you won't be eligible to receive the dividend, when it is paid on the 27th of April.

The company's next dividend payment will be €0.30 per share, and in the last 12 months, the company paid a total of €0.30 per share. Last year's total dividend payments show that Wiit has a trailing yield of 1.1% on the current share price of €27.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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 Wiit

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. Wiit lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 21% of its free cash flow as dividends last year, which is conservatively low.

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

historic-dividend
BIT:WIIT Historic Dividend April 21st 2022

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Wiit was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wiit has delivered an average of 38% per year annual increase in its dividend, based on the past four years of dividend payments.

Remember, you can always get a snapshot of Wiit's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Wiit worth buying for its dividend? It's hard to get used to Wiit paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Wiit has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in Wiit despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To that end, you should learn about the 3 warning signs we've spotted with Wiit (including 1 which is a bit unpleasant).

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.