It Might Not Be A Great Idea To Buy Cibus Nordic Real Estate AB (publ) (STO:CIBUS) For Its Next Dividend

Cibus Nordic Real Estate AB (publ) (STO:CIBUS) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Cibus Nordic Real Estate's shares before the 30th of December in order to be eligible for the dividend, which will be paid on the 10th of January.

The company's upcoming dividend is €0.08 a share, following on from the last 12 months, when the company distributed a total of €0.90 per share to shareholders. Calculating the last year's worth of payments shows that Cibus Nordic Real Estate has a trailing yield of 6.0% on the current share price of kr0171.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Cibus Nordic Real Estate

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cibus Nordic Real Estate's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. 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 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. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

We'd also point out that Cibus Nordic Real Estate issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past six years, Cibus Nordic Real Estate has increased its dividend at approximately 2.0% a year on average.

We update our analysis on Cibus Nordic Real Estate every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Cibus Nordic Real Estate worth buying for its dividend? 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. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

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 3 warning signs for Cibus Nordic Real Estate that we strongly recommend you have a look at before investing in the company.

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.