Just Three Days Till XBS PRO-LOG S.A. (WSE:XBS) Will Be Trading Ex-Dividend

XBS PRO-LOG S.A. (WSE:XBS) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase XBS PRO-LOG's shares on or after the 3rd of January, you won't be eligible to receive the dividend, when it is paid on the 10th of January.

The company's upcoming dividend is zł8.20 a share, following on from the last 12 months, when the company distributed a total of zł8.20 per share to shareholders. Last year's total dividend payments show that XBS PRO-LOG has a trailing yield of 7.7% on the current share price of zł106.00. 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.

See our latest analysis for XBS PRO-LOG

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. Its dividend payout ratio is 85% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether XBS PRO-LOG generated enough free cash flow to afford its dividend. The company paid out 101% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

XBS PRO-LOG 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.

XBS PRO-LOG 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 XBS PRO-LOG 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 XBS PRO-LOG paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see XBS PRO-LOG's earnings have been skyrocketing, up 22% per annum 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, XBS PRO-LOG has lifted its dividend by approximately 29% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is XBS PRO-LOG an attractive dividend stock, or better left on the shelf? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note XBS PRO-LOG paid out a much higher percentage of its free cash flow, which makes us uncomfortable. In summary, it's hard to get excited about XBS PRO-LOG from a dividend perspective.

However if you're still interested in XBS PRO-LOG as a potential investment, you should definitely consider some of the risks involved with XBS PRO-LOG. We've identified 4 warning signs with XBS PRO-LOG (at least 1 which is concerning), 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.

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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.