Here's Why We're Wary Of Buying eXp World Holdings' (NASDAQ:EXPI) For Its Upcoming Dividend

eXp World Holdings, Inc. (NASDAQ:EXPI) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. In other words, investors can purchase eXp World Holdings' shares before the 18th of November in order to be eligible for the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be US$0.05 per share, on the back of last year when the company paid a total of US$0.20 to shareholders. Calculating the last year's worth of payments shows that eXp World Holdings has a trailing yield of 1.4% on the current share price of US$14.54. If you buy this business for its dividend, you should have an idea of whether eXp World Holdings's dividend is reliable and sustainable. As a result, readers should always check whether eXp World Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for eXp World Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. eXp World Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 15% of its cash flow last year.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. eXp World Holdings reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, three years ago, eXp World Holdings has lifted its dividend by approximately 7.7% a year on average.

Remember, you can always get a snapshot of eXp World Holdings's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is eXp World Holdings worth buying for its dividend? 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." Bottom line: eXp World Holdings has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in eXp World Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. In terms of investment risks, we've identified 2 warning signs with eXp World Holdings and understanding them should be part of your investment process.

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.