Should You Buy Bank Handlowy w Warszawie S.A. (WSE:BHW) For Its Upcoming Dividend?

Bank Handlowy w Warszawie S.A. (WSE:BHW) stock is about to trade ex-dividend in 2 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Bank Handlowy w Warszawie investors that purchase the stock on or after the 20th of October will not receive the dividend, which will be paid on the 28th of October.

The company's upcoming dividend is zł3.44 a share, following on from the last 12 months, when the company distributed a total of zł10.29 per share to shareholders. Looking at the last 12 months of distributions, Bank Handlowy w Warszawie has a trailing yield of approximately 9.6% on its current stock price of zł107.00. If you buy this business for its dividend, you should have an idea of whether Bank Handlowy w Warszawie's dividend is reliable and sustainable. As a result, readers should always check whether Bank Handlowy w Warszawie has been able to grow its dividends, or if the dividend might be cut.

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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. Bank Handlowy w Warszawie paid out 74% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

View our latest analysis for Bank Handlowy w Warszawie

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Bank Handlowy w Warszawie has grown its earnings rapidly, up 30% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Bank Handlowy w Warszawie has lifted its dividend by approximately 3.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Should investors buy Bank Handlowy w Warszawie for the upcoming dividend? Earnings per share are growing nicely, and Bank Handlowy w Warszawie is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, Bank Handlowy w Warszawie looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Bank Handlowy w Warszawie has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 2 warning signs we've spotted with Bank Handlowy w Warszawie (including 1 which is significant).

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