Forever Entertainment S.A. (WSE:FOR) Will Pay A zł0.06 Dividend In Three Days

It looks like Forever Entertainment S.A. (WSE:FOR) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Forever Entertainment's shares on or after the 17th of September, you won't be eligible to receive the dividend, when it is paid on the 15th of December.

The company's next dividend payment will be zł0.06 per share. Last year, in total, the company distributed zł0.06 to shareholders. Looking at the last 12 months of distributions, Forever Entertainment has a trailing yield of approximately 1.9% on its current stock price of zł3.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Forever Entertainment can afford its dividend, and if the dividend could grow.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Forever Entertainment has a low and conservative payout ratio of just 23% of its income after tax. A useful secondary check can be to evaluate whether Forever Entertainment generated enough free cash flow to afford its dividend. Forever Entertainment paid out more free cash flow than it generated - 126%, to be precise - last year, which we think is concerningly 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.

Forever Entertainment paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Forever Entertainment's ability to maintain its dividend.

See our latest analysis for Forever Entertainment

Click here to see how much of its profit Forever Entertainment 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Forever Entertainment earnings per share are up 2.0% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last three years, Forever Entertainment has lifted its dividend by approximately 26% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Forever Entertainment worth buying for its dividend? Forever Entertainment has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Forever Entertainment's dividend merits.

If you want to look further into Forever Entertainment, it's worth knowing the risks this business faces. To that end, you should learn about the 2 warning signs we've spotted with Forever Entertainment (including 1 which can't be ignored).

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.