Three Days Left To Buy Odlewnie Polskie S.A. (WSE:ODL) Before The Ex-Dividend Date

Readers hoping to buy Odlewnie Polskie S.A. (WSE:ODL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Odlewnie Polskie's shares before the 29th of May in order to receive the dividend, which the company will pay on the 14th of June.

The company's upcoming dividend is zł0.50 a share, following on from the last 12 months, when the company distributed a total of zł0.50 per share to shareholders. Based on the last year's worth of payments, Odlewnie Polskie has a trailing yield of 4.9% on the current stock price of zł10.20. 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! So we need to investigate whether Odlewnie Polskie can afford its dividend, and if the dividend could grow.

See our latest analysis for Odlewnie Polskie

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Odlewnie Polskie paying out a modest 45% of its earnings. 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. Over the past year it paid out 186% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Odlewnie Polskie does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Odlewnie Polskie paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Odlewnie Polskie to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Odlewnie Polskie, with earnings per share up 8.1% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Odlewnie Polskie has lifted its dividend by approximately 14% 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.

Final Takeaway

Is Odlewnie Polskie worth buying for its dividend? Odlewnie Polskie delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 186% of its cash flow over the last year, which is a mediocre outcome. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Odlewnie Polskie's dividend merits.

However if you're still interested in Odlewnie Polskie as a potential investment, you should definitely consider some of the risks involved with Odlewnie Polskie. In terms of investment risks, we've identified 3 warning signs with Odlewnie Polskie 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.