Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP S.A. (WSE:KMP) Will Pay A zł1.05 Dividend In Three Days

Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP S.A. (WSE:KMP) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP's shares on or after the 29th of May, you won't be eligible to receive the dividend, when it is paid on the 20th of June.

The company's next dividend payment will be zł1.05 per share, and in the last 12 months, the company paid a total of zł1.00 per share. Based on the last year's worth of payments, Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP stock has a trailing yield of around 3.9% on the current share price of zł26.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP

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. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 33% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP's 15% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP has lifted its dividend by approximately 23% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

Final Takeaway

From a dividend perspective, should investors buy or avoid Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP, it's worth knowing the risks this business faces. Case in point: We've spotted 4 warning signs for Przedsiebiorstwo Produkcyjno - Handlowe KOMPAP you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.