Here's What We Like About Centrum Finansowe's (WSE:CFS) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Centrum Finansowe S.A. (WSE:CFS) is about to go ex-dividend in just 3 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. 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. Meaning, you will need to purchase Centrum Finansowe's shares before the 2nd of May to receive the dividend, which will be paid on the 9th of May.

The company's next dividend payment will be zł0.46 per share. Last year, in total, the company distributed zł0.46 to shareholders. Based on the last year's worth of payments, Centrum Finansowe stock has a trailing yield of around 9.3% on the current share price of zł4.92. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Centrum Finansowe

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Centrum Finansowe paid out a comfortable 49% of its profit last year. A useful secondary check can be to evaluate whether Centrum Finansowe generated enough free cash flow to afford its dividend. Dividends consumed 69% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 Centrum Finansowe 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Centrum Finansowe earnings per share are up 9.9% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Centrum Finansowe has lifted its dividend by approximately 16% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Centrum Finansowe worth buying for its dividend? Earnings per share growth has been modest, and it's interesting that Centrum Finansowe is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, it's hard to get excited about Centrum Finansowe from a dividend perspective.

While it's tempting to invest in Centrum Finansowe for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with Centrum Finansowe and understanding them should be part of your investment process.

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.