Here's Why We're Wary Of Buying Acinque's (BIT:AC5) For Its Upcoming Dividend

Acinque S.p.A. (BIT:AC5) stock is about to trade ex-dividend in 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. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Acinque's shares on or after the 7th of July will not receive the dividend, which will be paid on the 9th of July.

The company's next dividend payment will be €0.085 per share, on the back of last year when the company paid a total of €0.085 to shareholders. Based on the last year's worth of payments, Acinque has a trailing yield of 4.0% on the current stock price of €2.12. If you buy this business for its dividend, you should have an idea of whether Acinque's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Acinque distributed an unsustainably high 145% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

See our latest analysis for Acinque

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Earnings per share are basically flat over the past 12 months. Growth is a prerequisite for an outstanding dividend company over the long term, but we wouldn't read too much into flat numbers over any one year time frame.

We do note though, one year is too short a time to be drawing strong conclusions about a company's future growth prospects.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Acinque has delivered an average of 9.3% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Is Acinque an attractive dividend stock, or better left on the shelf? While we're glad to see that its earnings aren't shrinking, we're not enamored of the fact that it's paying out 145% of last year's earnings. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

However if you're still interested in Acinque as a potential investment, you should definitely consider some of the risks involved with Acinque. For instance, we've identified 2 warning signs for Acinque (1 is a bit unpleasant) you should be aware of.

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.