Don't Race Out To Buy Cibus Nordic Real Estate AB (publ) (STO:CIBUS) Just Because It's Going Ex-Dividend

By
Simply Wall St
Published
May 08, 2022
OM:CIBUS
Source: Shutterstock

Readers hoping to buy Cibus Nordic Real Estate AB (publ) (STO:CIBUS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Cibus Nordic Real Estate's shares on or after the 12th of May, you won't be eligible to receive the dividend, when it is paid on the 20th of May.

The company's next dividend payment will be €0.10 per share, on the back of last year when the company paid a total of €0.94 to shareholders. Looking at the last 12 months of distributions, Cibus Nordic Real Estate has a trailing yield of approximately 4.8% on its current stock price of SEK205. If you buy this business for its dividend, you should have an idea of whether Cibus Nordic Real Estate's dividend is reliable and sustainable. 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.

View our latest analysis for Cibus Nordic Real Estate

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. Cibus Nordic Real Estate is paying out an acceptable 52% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

historic-dividend
OM:CIBUS Historic Dividend May 8th 2022

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. That's why it's not ideal to see Cibus Nordic Real Estate's earnings per share have been shrinking at 3.2% a year over the previous five years.

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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, Cibus Nordic Real Estate has lifted its dividend by approximately 4.1% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Is Cibus Nordic Real Estate an attractive dividend stock, or better left on the shelf? While earnings per share are shrinking, it's encouraging to see that at least Cibus Nordic Real Estate's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. Bottom line: Cibus Nordic Real Estate has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

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. Every company has risks, and we've spotted 6 warning signs for Cibus Nordic Real Estate (of which 2 make us uncomfortable!) 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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