Should You Buy P.A. Nova S.A. (WSE:NVA) For Its Upcoming Dividend?

P.A. Nova S.A. (WSE:NVA) is about to trade ex-dividend in the next four 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase P.A. Nova's shares on or after the 6th of September will not receive the dividend, which will be paid on the 6th of December.

The company's next dividend payment will be zł0.70 per share. Last year, in total, the company distributed zł0.65 to shareholders. Based on the last year's worth of payments, P.A. Nova stock has a trailing yield of around 3.7% on the current share price of zł17.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for P.A. Nova

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. P.A. Nova is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 good news is it paid out just 18% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about P.A. Nova's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, P.A. Nova has lifted its dividend by approximately 2.7% a year on average.

The Bottom Line

Is P.A. Nova an attractive dividend stock, or better left on the shelf? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but P.A. Nova is halfway there. P.A. Nova looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in P.A. Nova for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 4 warning signs for P.A. Nova (of which 1 is concerning!) you should know about.

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.