ZUE (WSE:ZUE) Could Be A Buy For Its Upcoming Dividend

ZUE S.A. (WSE:ZUE) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase ZUE's shares on or after the 11th of September will not receive the dividend, which will be paid on the 27th of September.

The company's next dividend payment will be zł0.21 per share. Last year, in total, the company distributed zł0.21 to shareholders. Looking at the last 12 months of distributions, ZUE has a trailing yield of approximately 2.0% on its current stock price of zł10.40. 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! So we need to investigate whether ZUE can afford its dividend, and if the dividend could grow.

Check out our latest analysis for ZUE

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ZUE has a low and conservative payout ratio of just 20% of its income after tax. ZUE paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see ZUE's earnings have been skyrocketing, up 65% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ZUE has seen its dividend decline 5.5% per annum on average over the past eight years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Is ZUE worth buying for its dividend? Companies like ZUE that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating ZUE more closely.

In light of that, while ZUE has an appealing dividend, it's worth knowing the risks involved with this stock. For example - ZUE has 1 warning sign we think you should be aware of.

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.