Here's Why We're Wary Of Buying Verkkokauppa.com Oyj's (HEL:VERK) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Verkkokauppa.com Oyj (HEL:VERK) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Accordingly, Verkkokauppa.com Oyj investors that purchase the stock on or after the 17th of July will not receive the dividend, which will be paid on the 27th of July.
The company's next dividend payment will be €0.048 per share. Last year, in total, the company distributed €0.19 to shareholders. Looking at the last 12 months of distributions, Verkkokauppa.com Oyj has a trailing yield of approximately 6.1% on its current stock price of €3.165. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Verkkokauppa.com Oyj paid out more than half (73%) of its earnings last year, which is a regular payout ratio for most companies.
See our latest analysis for Verkkokauppa.com Oyj
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Verkkokauppa.com Oyj's earnings are down 4.0% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Verkkokauppa.com Oyj has lifted its dividend by approximately 2.6% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
To Sum It Up
Is Verkkokauppa.com Oyj worth buying for its dividend? We're not overly enthused to see Verkkokauppa.com Oyj's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. We think there are likely better opportunities out there.
If you want to look further into Verkkokauppa.com Oyj, it's worth knowing the risks this business faces. For example - Verkkokauppa.com Oyj has 2 warning signs we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.