Here's Why We're Wary Of Buying Platzer Fastigheter Holding's (STO:PLAZ B) For Its Upcoming Dividend

Platzer Fastigheter Holding AB (publ) (STO:PLAZ B) stock is about to trade ex-dividend in 4 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. Accordingly, Platzer Fastigheter Holding investors that purchase the stock on or after the 26th of September will not receive the dividend, which will be paid on the 2nd of October.

The company's upcoming dividend is kr01.00 a share, following on from the last 12 months, when the company distributed a total of kr2.00 per share to shareholders. Calculating the last year's worth of payments shows that Platzer Fastigheter Holding has a trailing yield of 1.9% on the current share price of kr0104.80. 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 Platzer Fastigheter Holding has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Platzer Fastigheter Holding

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Platzer Fastigheter Holding paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Platzer Fastigheter Holding 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 (64%) of its free cash flow in the past year, which is within an average range for most companies.

Click here to see how much of its profit Platzer Fastigheter Holding paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Platzer Fastigheter Holding 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Platzer Fastigheter Holding has delivered 13% dividend growth per year on average over the past 10 years.

Remember, you can always get a snapshot of Platzer Fastigheter Holding's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Platzer Fastigheter Holding? It's hard to get used to Platzer Fastigheter Holding paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Platzer Fastigheter Holding is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Platzer Fastigheter Holding despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Platzer Fastigheter Holding is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.