Nasdaq
華爾街日報We Wouldn't Be Too Quick To Buy Link Prop Investment AB (publ) (NGM:LINKAB) Before It Goes 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 Link Prop Investment AB (publ) (NGM:LINKAB) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Link Prop Investment investors that purchase the stock on or after the 6th of January will not receive the dividend, which will be paid on the 12th of January.
The company's next dividend payment will be kr02.00 per share. Last year, in total, the company distributed kr8.00 to shareholders. Looking at the last 12 months of distributions, Link Prop Investment has a trailing yield of approximately 5.4% on its current stock price of kr0147.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. An unusually high payout ratio of 231% of its profit suggests something is happening other than the usual distribution of profits to shareholders. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Link Prop Investment paid out more free cash flow than it generated - 124%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Cash is slightly more important than profit from a dividend perspective, but given Link Prop Investment's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.
Check out our latest analysis for Link Prop Investment
Click here to see how much of its profit Link Prop Investment paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Link Prop Investment's earnings per share have dropped 14% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
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, 10 years ago, Link Prop Investment has lifted its dividend by approximately 7.2% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Link Prop Investment is already paying out 231% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
To Sum It Up
Is Link Prop Investment worth buying for its dividend? Not only are earnings per share declining, but Link Prop Investment is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders as dividends. Unless there are grounds to believe a turnaround is imminent, this is one of the least attractive dividend stocks under this analysis. Bottom line: Link Prop Investment has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
With that in mind though, if the poor dividend characteristics of Link Prop Investment don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 6 warning signs for Link Prop Investment (3 shouldn't be ignored!) that deserve your attention before investing in 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.