Should Income Investors Look At Estoril Sol, SGPS, S.A. (ELI:ESON) Before Its Ex-Dividend?

Estoril Sol, SGPS, S.A. (ELI:ESON) 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. 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. Accordingly, Estoril Sol SGPS investors that purchase the stock on or after the 18th of June will not receive the dividend, which will be paid on the 20th of June.

The company's next dividend payment will be €0.1676 per share, and in the last 12 months, the company paid a total of €0.17 per share. Calculating the last year's worth of payments shows that Estoril Sol SGPS has a trailing yield of 2.8% on the current share price of €6.00. If you buy this business for its dividend, you should have an idea of whether Estoril Sol SGPS's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Estoril Sol SGPS

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Estoril Sol SGPS's payout ratio is modest, at just 35% of profit.

Click here to see how much of its profit Estoril Sol SGPS 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. Readers will understand then, why we're concerned to see Estoril Sol SGPS's earnings per share have dropped 16% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Estoril Sol SGPS's dividend payments per share have declined at 9.4% per year on average over the past seven years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Estoril Sol SGPS an attractive dividend stock, or better left on the shelf? Estoril Sol SGPS's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In summary, Estoril Sol SGPS appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Estoril Sol SGPS is showing 5 warning signs in our investment analysis, and 2 of those are a bit unpleasant...

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.

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