Don't Race Out To Buy Izostal S.A. (WSE:IZS) Just Because It's Going Ex-Dividend

Readers hoping to buy Izostal S.A. (WSE:IZS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Izostal's shares on or after the 4th of July, you won't be eligible to receive the dividend, when it is paid on the 21st of July.

The company's upcoming dividend is zł0.09 a share, following on from the last 12 months, when the company distributed a total of zł0.09 per share to shareholders. Last year's total dividend payments show that Izostal has a trailing yield of 3.4% on the current share price of zł2.63. If you buy this business for its dividend, you should have an idea of whether Izostal'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 from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Izostal paying out a modest 29% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Izostal paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

View our latest analysis for Izostal

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. 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 not ideal to see Izostal's earnings per share have been shrinking at 4.9% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Izostal has delivered an average of 2.5% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Should investors buy Izostal for the upcoming dividend? Izostal'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. It's not that we think Izostal is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering Izostal as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that Izostal is showing 5 warning signs in our investment analysis, and 2 of those make us uncomfortable...

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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.