Three Days Left Until Diös Fastigheter AB (publ) (STO:DIOS) Trades Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Diös Fastigheter AB (publ) (STO:DIOS) is about to go ex-dividend in just 3 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 Diös Fastigheter's shares before the 8th of April in order to be eligible for the dividend, which will be paid on the 14th of April.

The company's next dividend payment will be kr00.55 per share, on the back of last year when the company paid a total of kr2.20 to shareholders. Based on the last year's worth of payments, Diös Fastigheter stock has a trailing yield of around 3.3% on the current share price of kr067.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Diös Fastigheter's payout ratio is modest, at just 45% of profit. A useful secondary check can be to evaluate whether Diös Fastigheter generated enough free cash flow to afford its dividend. Luckily it paid out just 9.5% of its free cash flow last year.

It's positive to see that Diös Fastigheter's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for Diös Fastigheter

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Diös Fastigheter's 8.8% per annum decline in earnings in 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. Diös Fastigheter's dividend payments per share have declined at 2.6% per year on average over the past 10 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid Diös Fastigheter? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Diös Fastigheter looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Diös Fastigheter looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Diös Fastigheter has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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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.