It Might Not Be A Great Idea To Buy Genova Property Group AB (publ) (STO:GPG) For Its Next Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Genova Property Group AB (publ) (STO:GPG) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Genova Property Group's shares on or after the 6th of November will not receive the dividend, which will be paid on the 12th of November.

The company's upcoming dividend is kr00.22 a share, following on from the last 12 months, when the company distributed a total of kr0.88 per share to shareholders. Last year's total dividend payments show that Genova Property Group has a trailing yield of 2.1% on the current share price of kr042.90. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Genova Property Group has been able to grow its dividends, or if the dividend might be cut.

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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. Genova Property Group is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out dividends equivalent to 290% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Genova Property Group intends to continue funding this dividend, or if it could be forced to cut the payment.

While Genova Property Group's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Genova Property Group's ability to maintain its dividend.

See our latest analysis for Genova Property Group

Click here to see how much of its profit Genova Property Group paid out over the last 12 months.

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. Genova Property Group's earnings per share have fallen at approximately 17% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Given that Genova Property Group has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Is Genova Property Group an attractive dividend stock, or better left on the shelf? Genova Property Group's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Genova Property Group.

Although, if you're still interested in Genova Property Group and want to know more, you'll find it very useful to know what risks this stock faces. For example, Genova Property Group has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.