Is It Worth Considering Bulten AB (publ) (STO:BULTEN) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Bulten AB (publ) (STO:BULTEN) is about to go ex-dividend in just 4 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 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. Meaning, you will need to purchase Bulten's shares before the 26th of April to receive the dividend, which will be paid on the 3rd of May.

The company's next dividend payment will be kr02.50 per share. Last year, in total, the company distributed kr2.50 to shareholders. Calculating the last year's worth of payments shows that Bulten has a trailing yield of 3.5% on the current share price of kr072.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Bulten has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Bulten

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. Bulten paid out 51% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Bulten 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. With that in mind, we're discomforted by Bulten's 7.3% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bulten has delivered 2.3% dividend growth per year on average over the past 10 years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

Final Takeaway

Is Bulten worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. To summarise, Bulten looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about Bulten's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 2 warning signs for Bulten you should know about.

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.