Don't Buy Cibus Nordic Real Estate AB (publ) (STO:CIBUS) For Its Next Dividend Without Doing These Checks

Cibus Nordic Real Estate AB (publ) (STO:CIBUS) stock is about to trade ex-dividend in three days. 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. In other words, investors can purchase Cibus Nordic Real Estate's shares before the 25th of November in order to be eligible for the dividend, which will be paid on the 3rd of December.

The company's next dividend payment will be €0.08 per share, on the back of last year when the company paid a total of €0.90 to shareholders. Calculating the last year's worth of payments shows that Cibus Nordic Real Estate has a trailing yield of 6.2% on the current share price of kr0159.00. 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 investigate whether Cibus Nordic Real Estate can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Cibus Nordic Real Estate paid out 103% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 58% of its free cash flow as dividends, within the usual range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Cibus Nordic Real Estate fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

View our latest analysis for Cibus Nordic Real Estate

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. That's why it's not ideal to see Cibus Nordic Real Estate's earnings per share have been shrinking at 4.2% a year over the previous five years.

Cibus Nordic Real Estate also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, Cibus Nordic Real Estate has lifted its dividend by approximately 1.7% a year on average.

Final Takeaway

Is Cibus Nordic Real Estate an attractive dividend stock, or better left on the shelf? It's never fun to see a company's earnings per share in retreat. What's more, Cibus Nordic Real Estate is paying out a majority of its earnings and over half its free cash flow. It's hard to say if the business has the financial resources and time to turn things around without cutting the dividend. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Cibus Nordic Real Estate.

With that being said, if you're still considering Cibus Nordic Real Estate as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 3 warning signs for Cibus Nordic Real Estate (2 don't sit too well with us!) that you ought to be aware of before buying the shares.

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.