Don't Race Out To Buy SC Arteca Jilava SA (BVB:ARJI) Just Because It's Going Ex-Dividend

SC Arteca Jilava SA (BVB:ARJI) stock is about to trade ex-dividend in 3 days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase SC Arteca Jilava's shares before the 26th of April to receive the dividend, which will be paid on the 22nd of May.

The company's next dividend payment will be RON00.216 per share, and in the last 12 months, the company paid a total of RON0.22 per share. Calculating the last year's worth of payments shows that SC Arteca Jilava has a trailing yield of 3.2% on the current share price of RON06.85. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for SC Arteca Jilava

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year, SC Arteca Jilava paid out 108% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.

Click here to see how much of its profit SC Arteca Jilava paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see SC Arteca Jilava's earnings per share have been shrinking at 5.0% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, SC Arteca Jilava has lifted its dividend by approximately 7.9% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. SC Arteca Jilava is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

To Sum It Up

Should investors buy SC Arteca Jilava for the upcoming dividend? Not only are earnings per share shrinking, but SC Arteca Jilava is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that being said, if you're still considering SC Arteca Jilava as an investment, you'll find it beneficial to know what risks this stock is facing. For instance, we've identified 5 warning signs for SC Arteca Jilava (3 are concerning) you should be aware of.

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.