Why It Might Not Make Sense To Buy Cibus Nordic Real Estate AB (publ) (STO:CIBUS) For Its Upcoming Dividend

Cibus Nordic Real Estate AB (publ) (STO:CIBUS) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Cibus Nordic Real Estate's shares before the 31st of March in order to receive the dividend, which the company will pay on the 8th of April.

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. Based on the last year's worth of payments, Cibus Nordic Real Estate has a trailing yield of 6.7% on the current stock price of kr0145.60. 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 Cibus Nordic Real Estate has been able to grow its dividends, or if the dividend might be cut.

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. 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. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.

Check out 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. If earnings fall far enough, the company could be forced to cut its dividend. Cibus Nordic Real Estate reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

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 has delivered 1.7% dividend growth per year on average over the past seven years.

Remember, you can always get a snapshot of Cibus Nordic Real Estate's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Should investors buy Cibus Nordic Real Estate for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." 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 Cibus Nordic Real Estate don't faze you, it's worth being mindful of the risks involved with this business. 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.

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.