Don't Race Out To Buy Västra Hamnen Corporate Finance AB (publ) (STO:VH) Just Because It's Going Ex-Dividend

It looks like Västra Hamnen Corporate Finance AB (publ) (STO:VH) is about to go 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 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 Västra Hamnen Finance's shares before the 29th of April to receive the dividend, which will be paid on the 6th of May.

The company's next dividend payment will be kr03.00 per share. Last year, in total, the company distributed kr3.00 to shareholders. Based on the last year's worth of payments, Västra Hamnen Finance stock has a trailing yield of around 4.0% on the current share price of kr075.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Västra Hamnen Finance

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Västra Hamnen Finance paid out 94% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

Click here to see how much of its profit Västra Hamnen Finance paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Västra Hamnen Finance's earnings per share have plummeted approximately 32% a year over the previous three years.

Given that Västra Hamnen Finance has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy Västra Hamnen Finance for the upcoming dividend? Not only are earnings per share shrinking, but Västra Hamnen Finance 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. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that being said, if you're still considering Västra Hamnen Finance as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 4 warning signs for Västra Hamnen Finance (of which 2 are concerning!) you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.