Don't Buy Aquaticus Real Estate AB (publ) (NGM:AQUAT) For Its Next Dividend Without Doing These Checks

Readers hoping to buy Aquaticus Real Estate AB (publ) (NGM:AQUAT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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. Accordingly, Aquaticus Real Estate investors that purchase the stock on or after the 27th of December will not receive the dividend, which will be paid on the 3rd of January.

The company's upcoming dividend is kr01.00 a share, following on from the last 12 months, when the company distributed a total of kr4.00 per share to shareholders. Calculating the last year's worth of payments shows that Aquaticus Real Estate has a trailing yield of 6.5% on the current share price of kr062.00. If you buy this business for its dividend, you should have an idea of whether Aquaticus Real Estate's dividend is reliable and sustainable. As a result, readers should always check whether Aquaticus Real Estate has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Aquaticus Real Estate

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. Aquaticus Real Estate's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Aquaticus Real Estate didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 32% of its free cash flow in the past year.

Click here to see how much of its profit Aquaticus Real Estate 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Aquaticus Real Estate was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last three years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Aquaticus Real Estate's dividend payments are effectively flat on where they were two years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

We update our analysis on Aquaticus Real Estate every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Has Aquaticus Real Estate got what it takes to maintain its dividend payments? It's hard to get used to Aquaticus Real Estate paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Aquaticus Real Estate.

With that in mind though, if the poor dividend characteristics of Aquaticus Real Estate don't faze you, it's worth being mindful of the risks involved with this business. To that end, you should learn about the 4 warning signs we've spotted with Aquaticus Real Estate (including 1 which 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.