Don't Race Out To Buy Aquaticus Real Estate AB (publ) (NGM:AQUAT) Just Because It's Going Ex-Dividend

It looks like Aquaticus Real Estate AB (publ) (NGM:AQUAT) is about to go ex-dividend in the next 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Aquaticus Real Estate investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 3rd of October.

The company's next dividend payment will be kr01.00 per share. Last year, in total, the company distributed kr4.00 to shareholders. Looking at the last 12 months of distributions, Aquaticus Real Estate has a trailing yield of approximately 5.7% on its current stock price of kr070.00. 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.

View our latest analysis for Aquaticus Real Estate

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Aquaticus Real Estate reported a loss last year, so it's not great to see that it has continued paying a dividend. 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 44% 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 sadly its loss per share worsened by 164% on the previous year.

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 broadly unchanged compared to 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.

Remember, you can always get a snapshot of Aquaticus Real Estate's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Aquaticus Real Estate worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Aquaticus Real Estate. For instance, we've identified 3 warning signs for Aquaticus Real Estate (1 doesn't sit too well with us) you should be aware of.

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.