Four Days Left Until ESOTIQ & Henderson S.A. (WSE:EAH) Trades Ex-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 ESOTIQ & Henderson S.A. (WSE:EAH) is about to go ex-dividend in just 4 days. The ex-dividend date generally occurs two days 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. 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 ESOTIQ & Henderson's shares on or after the 28th of September, you won't be eligible to receive the dividend, when it is paid on the 17th of December.

The company's upcoming dividend is zł3.00 a share, following on from the last 12 months, when the company distributed a total of zł3.00 per share to shareholders. Based on the last year's worth of payments, ESOTIQ & Henderson has a trailing yield of 7.9% on the current stock price of zł37.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, ESOTIQ & Henderson paid out 103% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether ESOTIQ & Henderson generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 25% of the free cash flow it generated, which is a comfortable payout ratio.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and ESOTIQ & Henderson fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Check out our latest analysis for ESOTIQ & Henderson

Click here to see how much of its profit ESOTIQ & Henderson paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see ESOTIQ & Henderson earnings per share are up 2.4% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ESOTIQ & Henderson has delivered an average of 15% per year annual increase in its dividend, based on the past eight years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Should investors buy ESOTIQ & Henderson for the upcoming dividend? Earnings per share have grown modestly, and last year ESOTIQ & Henderson paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. All things considered, we are not particularly enthused about ESOTIQ & Henderson from a dividend perspective.

If you want to look further into ESOTIQ & Henderson, it's worth knowing the risks this business faces. Be aware that ESOTIQ & Henderson is showing 5 warning signs in our investment analysis, and 2 of those don't sit too well with us...

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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.