Just Two Days Till Bokusgruppen AB (publ) (STO:BOKUS) Will Be Trading Ex-Dividend

Bokusgruppen AB (publ) (STO:BOKUS) stock is about to trade ex-dividend in two 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Bokusgruppen investors that purchase the stock on or after the 7th of November will not receive the dividend, which will be paid on the 13th of November.

The company's upcoming dividend is kr01.65 a share, following on from the last 12 months, when the company distributed a total of kr3.30 per share to shareholders. Calculating the last year's worth of payments shows that Bokusgruppen has a trailing yield of 6.2% on the current share price of kr053.60. 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.

Check out our latest analysis for Bokusgruppen

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. Bokusgruppen distributed an unsustainably high 132% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. 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. The good news is it paid out just 22% of its free cash flow in the last year.

It's good to see that while Bokusgruppen's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Bokusgruppen's earnings have been skyrocketing, up 51% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last three years, Bokusgruppen has lifted its dividend by approximately 3.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Bokusgruppen is keeping back more of its profits to grow the business.

The Bottom Line

From a dividend perspective, should investors buy or avoid Bokusgruppen? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Bokusgruppen's paying out such a high percentage of its profit. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Bokusgruppen has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Bokusgruppen and understanding them should be part of your investment process.

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

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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.