Poligrafici Printing S.p.A. (BIT:POPR) is about to trade ex-dividend in the next 4 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. Therefore, if you purchase Poligrafici Printing's shares on or after the 19th of October, you won't be eligible to receive the dividend, when it is paid on the 21st of October.
The company's next dividend payment will be €0.004 per share, on the back of last year when the company paid a total of €0.016 to shareholders. Based on the last year's worth of payments, Poligrafici Printing has a trailing yield of 3.1% on the current stock price of €0.51. If you buy this business for its dividend, you should have an idea of whether Poligrafici Printing's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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. Poligrafici Printing is paying out an acceptable 53% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Poligrafici Printing generated enough free cash flow to afford its dividend. The company paid out 91% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
Poligrafici Printing paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Poligrafici Printing to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
See our latest analysis for Poligrafici Printing
Click here to see how much of its profit Poligrafici Printing paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Poligrafici Printing's 9.2% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Poligrafici Printing's dividend payments per share have declined at 20% per year on average over the past five years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
From a dividend perspective, should investors buy or avoid Poligrafici Printing? Poligrafici Printing had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. It's not that we think Poligrafici Printing is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
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 Poligrafici Printing. We've identified 4 warning signs with Poligrafici Printing (at least 1 which is a bit unpleasant), and understanding these should be part of your investment process.
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.