It Might Not Be A Great Idea To Buy YeboYethu (RF) Limited (JSE:YYLBEE) For Its Next Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that YeboYethu (RF) Limited (JSE:YYLBEE) is about to go ex-dividend in just four 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase YeboYethu (RF)'s shares on or after the 12th of December, you won't be eligible to receive the dividend, when it is paid on the 18th of December.

The company's next dividend payment will be R0.92 per share, on the back of last year when the company paid a total of R1.83 to shareholders. Looking at the last 12 months of distributions, YeboYethu (RF) has a trailing yield of approximately 6.1% on its current stock price of ZAR30. 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 YeboYethu (RF)

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. YeboYethu (RF) 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.

Click here to see how much of its profit YeboYethu (RF) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. YeboYethu (RF) was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. YeboYethu (RF) has delivered an average of 8.5% per year annual increase in its dividend, based on the past six years of dividend payments.

Get our latest analysis on YeboYethu (RF)'s balance sheet health here.

The Bottom Line

Has YeboYethu (RF) got what it takes to maintain its dividend payments? It's hard to get past the idea of YeboYethu (RF) paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with YeboYethu (RF). To help with this, we've discovered 4 warning signs for YeboYethu (RF) (2 are potentially serious!) that you ought to be aware of before buying the 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.