Why It Might Not Make Sense To Buy Remak-Energomontaz S.A. (WSE:RMK) 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 Remak-Energomontaz S.A. (WSE:RMK) is about to trade ex-dividend in the next 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Remak-Energomontaz's shares before the 5th of May in order to be eligible for the dividend, which will be paid on the 8th of July.

The company's next dividend payment will be zł0.30 per share, on the back of last year when the company paid a total of zł0.30 to shareholders. Calculating the last year's worth of payments shows that Remak-Energomontaz has a trailing yield of 2.3% on the current share price of zł13.20. If you buy this business for its dividend, you should have an idea of whether Remak-Energomontaz's dividend is reliable and sustainable. As a result, readers should always check whether Remak-Energomontaz has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Remak-Energomontaz is paying out just 18% 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.

Check out our latest analysis for Remak-Energomontaz

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Remak-Energomontaz's 14% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Remak-Energomontaz's dividend payments per share have declined at 16% per year on average over the past three years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Is Remak-Energomontaz worth buying for its dividend? Remak-Energomontaz's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Remak-Energomontaz.

So if you're still interested in Remak-Energomontaz despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 3 warning signs for Remak-Energomontaz that we strongly recommend you have a look at before investing in the company.

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.