Just Three Days Till New Wave Group AB (publ) (STO:NEWA B) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see New Wave Group AB (publ) (STO:NEWA B) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase New Wave Group's shares before the 1st of December in order to receive the dividend, which the company will pay on the 5th of December.

The company's next dividend payment will be kr01.75 per share, on the back of last year when the company paid a total of kr3.50 to shareholders. Calculating the last year's worth of payments shows that New Wave Group has a trailing yield of 3.1% on the current share price of kr0113.40. 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! As a result, readers should always check whether New Wave Group has been able to grow its dividends, or if the dividend might be cut.

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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. New Wave Group is paying out an acceptable 57% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out an unsustainably high 242% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how New Wave Group intends to continue funding this dividend, or if it could be forced to cut the payment.

New Wave Group 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 New Wave Group's ability to maintain its dividend.

View our latest analysis for New Wave Group

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Fortunately for readers, New Wave Group's earnings per share have been growing at 17% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. New Wave Group has delivered an average of 21% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid New Wave Group? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note New Wave Group paid out a much higher percentage of its free cash flow, which makes us uncomfortable. In summary, while it has some positive characteristics, we're not inclined to race out and buy New Wave Group today.

With that being said, if dividends aren't your biggest concern with New Wave Group, you should know about the other risks facing this business. Be aware that New Wave Group is showing 2 warning signs in our investment analysis, and 1 of those is 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.