Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Krynicki Recykling Spólka Akcyjna (WSE:KRC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Krynicki Recykling Spólka Akcyjna's shares before the 4th of June to receive the dividend, which will be paid on the 17th of June.
The company's upcoming dividend is zł1.20 a share, following on from the last 12 months, when the company distributed a total of zł1.35 per share to shareholders. Based on the last year's worth of payments, Krynicki Recykling Spólka Akcyjna has a trailing yield of 6.8% on the current stock price of PLN20. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Krynicki Recykling Spólka Akcyjna has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Krynicki Recykling Spólka Akcyjna distributed an unsustainably high 127% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether Krynicki Recykling Spólka Akcyjna generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 35% of the free cash flow it generated, which is a comfortable payout ratio.
It's good to see that while Krynicki Recykling Spólka Akcyjna's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
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. Fortunately for readers, Krynicki Recykling Spólka Akcyjna's earnings per share have been growing at 18% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past five years, Krynicki Recykling Spólka Akcyjna has increased its dividend at approximately 35% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
From a dividend perspective, should investors buy or avoid Krynicki Recykling Spólka Akcyjna? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Krynicki Recykling Spólka Akcyjna's paying out such a high percentage of its profit. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
In light of that, while Krynicki Recykling Spólka Akcyjna has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 4 warning signs for Krynicki Recykling Spólka Akcyjna that you should be aware of before investing in their shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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