We Wouldn't Be Too Quick To Buy Krona Public Real Estate AB (publ) (NGM:KRONA) Before It Goes Ex-Dividend

Krona Public Real Estate AB (publ) (NGM:KRONA) stock is about to trade ex-dividend in four 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 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. Accordingly, Krona Public Real Estate investors that purchase the stock on or after the 5th of April will not receive the dividend, which will be paid on the 13th of April.

The company's next dividend payment will be kr1.63 per share, and in the last 12 months, the company paid a total of kr3.25 per share. Last year's total dividend payments show that Krona Public Real Estate has a trailing yield of 5.6% on the current share price of SEK58. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Krona Public 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. Krona Public Real Estate paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The company paid out 93% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Click here to see how much of its profit Krona Public 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Krona Public Real Estate was unprofitable last year, and sadly its loss per share worsened by 130% on the previous year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Krona Public Real Estate's dividend payments are broadly unchanged compared to where they were two years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

Get our latest analysis on Krona Public Real Estate's balance sheet health here.

The Bottom Line

Is Krona Public Real Estate an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. Bottom line: Krona Public Real Estate has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Krona Public Real Estate and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 4 warning signs for Krona Public Real Estate (1 is concerning!) that deserve your attention before investing in 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.