Do These 3 Checks Before Buying Elon AB (publ) (STO:ELON) For Its Upcoming Dividend

Elon AB (publ) (STO:ELON) stock is about to trade ex-dividend in three days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Elon's shares on or after the 8th of May will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be kr01.25 per share, and in the last 12 months, the company paid a total of kr1.25 per share. Looking at the last 12 months of distributions, Elon has a trailing yield of approximately 4.4% on its current stock price of kr028.70. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Elon has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Elon

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Elon lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 21% of its free cash flow as dividends last year, which is conservatively low.

Click here to see how much of its profit Elon 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. Elon was unprofitable last year, and sadly its loss per share worsened by 144% on the previous year.

Unfortunately Elon has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

We update our analysis on Elon every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Has Elon got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

So if you're still interested in Elon despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To help with this, we've discovered 3 warning signs for Elon that you should be aware of before investing in their shares.

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.