Here's Why We're Wary Of Buying JWW Invest's (WSE:JWW) For Its Upcoming Dividend

JWW Invest S.A. (WSE:JWW) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase JWW Invest's shares on or after the 24th of September will not receive the dividend, which will be paid on the 24th of October.

The company's next dividend payment will be zł0.13 per share, on the back of last year when the company paid a total of zł0.19 to shareholders. Calculating the last year's worth of payments shows that JWW Invest has a trailing yield of 5.7% on the current share price of zł3.35. If you buy this business for its dividend, you should have an idea of whether JWW Invest's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. JWW Invest paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. 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 JWW Invest

Click here to see how much of its profit JWW Invest 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that JWW Invest's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, three years ago, JWW Invest has lifted its dividend by approximately 47% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid JWW Invest? Earnings per share have not grown and JWW Invest's profit payout ratio looks reasonable. However, it paid out a disconcertingly high percentage of its cashflow, which is a worry. Bottom line: JWW Invest has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that being said, if you're still considering JWW Invest as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 3 warning signs for JWW Invest (1 can't be ignored!) that you ought to be aware of before buying the shares.

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.