Here's Why We're Wary Of Buying Tura Group's (NGM:TURA) For Its Upcoming Dividend

Tura Group AB (NGM:TURA) is about to trade ex-dividend in the next four 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Tura Group's shares on or after the 30th of May, you won't be eligible to receive the dividend, when it is paid on the 5th of June.

The company's next dividend payment will be kr00.10 per share. Last year, in total, the company distributed kr0.10 to shareholders. Last year's total dividend payments show that Tura Group has a trailing yield of 1.9% on the current share price of kr05.25. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tura Group paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies. 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. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Tura Group'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.

Check out our latest analysis for Tura Group

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. From this perspective, we're disturbed to see earnings per share plunged 22% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.

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

Final Takeaway

Should investors buy Tura Group for the upcoming dividend? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Although, if you're still interested in Tura Group and want to know more, you'll find it very useful to know what risks this stock faces. For instance, we've identified 4 warning signs for Tura Group (1 makes us a bit uncomfortable) you should be aware of.

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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.