雅虎香港財經 Dividend Investors: Don't Be Too Quick To Buy Klassik Radio AG (ETR:KA8) For Its Upcoming Dividend
It looks like Klassik Radio AG (ETR:KA8) is about to go ex-dividend in the next 3 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 Klassik Radio's shares on or after the 19th of June will not receive the dividend, which will be paid on the 21st of June.
The company's upcoming dividend is €0.15 a share, following on from the last 12 months, when the company distributed a total of €0.15 per share to shareholders. Last year's total dividend payments show that Klassik Radio has a trailing yield of 3.9% on the current share price of €3.86. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Klassik Radio
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. Klassik Radio distributed an unsustainably high 113% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Klassik Radio generated enough free cash flow to afford its dividend. It paid out more than half (61%) of its free cash flow in the past year, which is within an average range for most companies.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Klassik Radio fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Click here to see how much of its profit Klassik Radio 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. Readers will understand then, why we're concerned to see Klassik Radio's earnings per share have dropped 17% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Klassik Radio has increased its dividend at approximately 3.2% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Klassik Radio is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
To Sum It Up
Is Klassik Radio an attractive dividend stock, or better left on the shelf? Earnings per share have been in decline, which is not encouraging. Worse, Klassik Radio's paying out a majority of its earnings and more than half its free cash flow. Positive cash flows are good news but it's not a good combination. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Klassik Radio.
Although, if you're still interested in Klassik Radio and want to know more, you'll find it very useful to know what risks this stock faces. Be aware that Klassik Radio is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning...
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
