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

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Aquaticus Real Estate AB (publ) (NGM:AQUAT) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Therefore, if you purchase Aquaticus Real Estate's shares on or after the 28th of December, you won't be eligible to receive the dividend, when it is paid on the 4th of January.

The company's upcoming dividend is kr1.00 a share, following on from the last 12 months, when the company distributed a total of kr4.00 per share to shareholders. Based on the last year's worth of payments, Aquaticus Real Estate stock has a trailing yield of around 5.3% on the current share price of SEK76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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.

View our latest analysis for Aquaticus Real Estate

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. Aquaticus Real Estate paid out 125% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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 distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.

It's good to see that while Aquaticus Real Estate's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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?

Businesses with shrinking earnings are tricky from a dividend perspective. 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's earnings per share plummeted 38% over the past year,which is rarely good news for the dividend.

Unfortunately Aquaticus Real Estate has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

From a dividend perspective, should investors buy or avoid Aquaticus Real Estate? It's not a great combination to see a company with earnings in decline and paying out 125% of its profits, which could imply the dividend may be at risk of being cut in the future. Yet cashflow was much stronger, which makes us wonder if there are some large timing issues in Aquaticus Real Estate's cash flows, or perhaps the company has written down some assets aggressively, reducing its income. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that being said, if you're still considering Aquaticus Real Estate as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 8 warning signs for Aquaticus Real Estate (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.