Just Four Days Till Fabrity Holding S.A. (WSE:FAB) Will Be Trading Ex-Dividend

Fabrity Holding S.A. (WSE:FAB) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Fabrity Holding's shares before the 22nd of November in order to receive the dividend, which the company will pay on the 28th of November.

The company's next dividend payment will be zł1.30 per share, and in the last 12 months, the company paid a total of zł3.25 per share. Based on the last year's worth of payments, Fabrity Holding stock has a trailing yield of around 7.6% on the current share price of zł34.10. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Fabrity Holding

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fabrity Holding is paying out an acceptable 63% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Fabrity Holding generated enough free cash flow to afford its dividend. It paid out an unsustainably high 227% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

Fabrity Holding 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.

Fabrity Holding 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 Fabrity Holding 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 Fabrity Holding paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Fabrity Holding has grown its earnings rapidly, up 52% a year for the past five years. Earnings have been growing quickly, 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 10 years, Fabrity Holding has lifted its dividend by approximately 10% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Fabrity Holding worth buying for its dividend? The best dividend stocks typically boast a long history of growing earnings per share (EPS) via a combination of earnings growth and buybacks. That's why we're glad to see Fabrity Holding growing its EPS, buying back stock and paying out a reasonable percentage of its earnings as dividends. However, we note with some concern that it paid out 227% of its free cash flow last year, which is uncomfortably high and makes us wonder why the company chose to spend even more cash on buybacks. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you want to look further into Fabrity Holding, it's worth knowing the risks this business faces. For example, Fabrity Holding has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.