Acrinova AB (publ) (STO:ACRI A) Is About To Go Ex-Dividend, And It Pays A 2.9% Yield

Readers hoping to buy Acrinova AB (publ) (STO:ACRI A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Acrinova's shares before the 8th of September in order to receive the dividend, which the company will pay on the 12th of September.

The company's next dividend payment will be kr00.70 per share, and in the last 12 months, the company paid a total of kr0.40 per share. Last year's total dividend payments show that Acrinova has a trailing yield of 2.9% on the current share price of kr014.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Acrinova has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Acrinova paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. 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. Acrinova paid out more free cash flow than it generated - 133%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Acrinova's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Acrinova to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Check out our latest analysis for Acrinova

Click here to see how much of its profit Acrinova 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. Readers will understand then, why we're concerned to see Acrinova's earnings per share have dropped 22% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Acrinova dividends are largely the same as they were 10 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid Acrinova? Acrinova had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that in mind though, if the poor dividend characteristics of Acrinova don't faze you, it's worth being mindful of the risks involved with this business. We've identified 5 warning signs with Acrinova (at least 2 which make us uncomfortable), and understanding them should be part of your investment process.

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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.