Yahoo Finance Do These 3 Checks Before Buying 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 three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Klassik Radio's shares before the 14th of June in order to receive the dividend, which the company will pay on the 16th of June.
The company's next dividend payment will be €0.15 per share, and in the last 12 months, the company paid a total of €0.21 per share. Looking at the last 12 months of distributions, Klassik Radio has a trailing yield of approximately 4.8% on its current stock price of €4.42. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Klassik Radio has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Klassik Radio
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Klassik Radio is paying out an acceptable 71% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 5,628% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
While Klassik Radio's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Klassik Radio to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see how much of its profit Klassik Radio paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Klassik Radio's earnings per share have fallen at approximately 16% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
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, Klassik Radio has lifted its dividend by approximately 6.7% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
To Sum It Up
Is Klassik Radio an attractive dividend stock, or better left on the shelf? It's definitely not great to see earnings per share shrinking. The company paid out an acceptable percentage of its income, but an uncomfortably high percentage of its cash flow over the past year. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Klassik Radio.
With that being said, if you're still considering Klassik Radio as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that Klassik Radio is showing 4 warning signs in our investment analysis, and 1 of those is potentially serious...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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