It Might Not Be A Great Idea To Buy Provide IT Sweden AB (publ) (NGM:PROVIT) For Its Next Dividend

Provide IT Sweden AB (publ) (NGM:PROVIT) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Provide IT Sweden's shares before the 29th of September in order to receive the dividend, which the company will pay on the 5th of October.

The company's next dividend payment will be kr0.33 per share, on the back of last year when the company paid a total of kr0.34 to shareholders. Last year's total dividend payments show that Provide IT Sweden has a trailing yield of 5.3% on the current share price of SEK6.4. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Provide IT Sweden

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Provide IT Sweden distributed an unsustainably high 146% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Provide IT Sweden's earnings per share have fallen at approximately 9.6% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Provide IT Sweden has seen its dividend decline 11% per annum on average over the past five years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Should investors buy Provide IT Sweden for the upcoming dividend? Not only are earnings per share shrinking, but Provide IT Sweden is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Provide IT Sweden despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Provide IT Sweden is showing 5 warning signs in our investment analysis, and 2 of those shouldn't be ignored...

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.