Why It Might Not Make Sense To Buy Allfunds Group plc (AMS:ALLFG) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Allfunds Group plc (AMS:ALLFG) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Allfunds Group investors that purchase the stock on or after the 8th of May will not receive the dividend, which will be paid on the 13th of May.

The company's next dividend payment will be €0.131 per share. Last year, in total, the company distributed €0.13 to shareholders. Last year's total dividend payments show that Allfunds Group has a trailing yield of 2.6% on the current share price of €5.13. 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 check whether the dividend payments are covered, and if earnings are growing.

We've discovered 1 warning sign about Allfunds Group. View them for free.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Allfunds Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

See our latest analysis for Allfunds Group

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Allfunds Group 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last three years, Allfunds Group has lifted its dividend by approximately 38% a year on average.

Get our latest analysis on Allfunds Group's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Allfunds Group? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Allfunds Group. Our analysis shows 1 warning sign for Allfunds Group and you should be aware of this before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.