We Wouldn't Be Too Quick To Buy Przedsiebiorstwo Hydrauliki Silowej HYDROTOR S.A. (WSE:HDR) Before It Goes Ex-Dividend

Przedsiebiorstwo Hydrauliki Silowej HYDROTOR S.A. (WSE:HDR) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Przedsiebiorstwo Hydrauliki Silowej HYDROTOR's shares on or after the 7th of September will not receive the dividend, which will be paid on the 22nd of September.

The company's next dividend payment will be zł2.00 per share. Last year, in total, the company distributed zł2.00 to shareholders. Last year's total dividend payments show that Przedsiebiorstwo Hydrauliki Silowej HYDROTOR has a trailing yield of 4.8% on the current share price of PLN42. 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! As a result, readers should always check whether Przedsiebiorstwo Hydrauliki Silowej HYDROTOR has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Przedsiebiorstwo Hydrauliki Silowej HYDROTOR

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The company paid out 92% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Przedsiebiorstwo Hydrauliki Silowej HYDROTOR paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Przedsiebiorstwo Hydrauliki Silowej HYDROTOR to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Przedsiebiorstwo Hydrauliki Silowej HYDROTOR paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Przedsiebiorstwo Hydrauliki Silowej HYDROTOR's earnings are down 4.1% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Przedsiebiorstwo Hydrauliki Silowej HYDROTOR dividends are largely the same as they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

To Sum It Up

Has Przedsiebiorstwo Hydrauliki Silowej HYDROTOR got what it takes to maintain its dividend payments? Przedsiebiorstwo Hydrauliki Silowej HYDROTOR had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

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 Przedsiebiorstwo Hydrauliki Silowej HYDROTOR. Our analysis shows 3 warning signs for Przedsiebiorstwo Hydrauliki Silowej HYDROTOR and you should be aware of these 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.