Don't Race Out To Buy Cibus Nordic Real Estate AB (publ) (STO:CIBUS) 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 Cibus Nordic Real Estate AB (publ) (STO:CIBUS) is about to trade ex-dividend in the next day or so. The ex-dividend date is one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Cibus Nordic Real Estate's shares before the 24th of February in order to be eligible for the dividend, which will be paid on the 4th of March.

The company's next dividend payment will be €0.08 per share, and in the last 12 months, the company paid a total of €0.54 per share. Based on the last year's worth of payments, Cibus Nordic Real Estate has a trailing yield of 3.6% on the current stock price of kr0164.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Cibus Nordic Real Estate can afford its dividend, and if the dividend could grow.

See our latest analysis for Cibus Nordic Real Estate

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. Cibus Nordic Real Estate reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Cibus Nordic 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. It paid out more than half (54%) of its free cash flow in the past year, which is within an average range for most companies.

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. Cibus Nordic Real Estate was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cibus Nordic Real Estate's dividend payments per share have declined at 6.3% per year on average over the past six years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Get our latest analysis on Cibus Nordic Real Estate's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Cibus Nordic Real Estate? 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. Bottom line: Cibus Nordic 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 Cibus Nordic Real Estate and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 2 warning signs for Cibus Nordic Real Estate that we strongly recommend you have a look at before investing in the company.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.