Do These 3 Checks Before Buying Kopparbergs Bryggeri AB (publ) (NGM:KOBR B) For Its Upcoming Dividend

Kopparbergs Bryggeri AB (publ) (NGM:KOBR B) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Kopparbergs Bryggeri's shares before the 14th of May in order to be eligible for the dividend, which will be paid on the 20th of May.

The company's next dividend payment will be kr07.50 per share, and in the last 12 months, the company paid a total of kr7.50 per share. Last year's total dividend payments show that Kopparbergs Bryggeri has a trailing yield of 6.3% on the current share price of kr0119.60. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kopparbergs Bryggeri distributed an unsustainably high 132% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

Check out our latest analysis for Kopparbergs Bryggeri

Click here to see how much of its profit Kopparbergs Bryggeri paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Kopparbergs Bryggeri's 10% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kopparbergs Bryggeri has delivered an average of 6.1% per year annual increase in its dividend, based on the past nine years of dividend payments. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Kopparbergs Bryggeri 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.

Final Takeaway

Should investors buy Kopparbergs Bryggeri for the upcoming dividend? Earnings per share are in decline and Kopparbergs Bryggeri is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that in mind though, if the poor dividend characteristics of Kopparbergs Bryggeri don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 2 warning signs for Kopparbergs Bryggeri (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

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.