Yahoo Finance PWO (ETR:PWO) Could Be A Buy For Its Upcoming Dividend
It looks like PWO AG (ETR:PWO) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, PWO investors that purchase the stock on or after the 7th of June will not receive the dividend, which will be paid on the 11th of June.
The company's next dividend payment will be €1.75 per share. Last year, in total, the company distributed €1.75 to shareholders. Looking at the last 12 months of distributions, PWO has a trailing yield of approximately 5.6% on its current stock price of €31.40. 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! So we need to investigate whether PWO can afford its dividend, and if the dividend could grow.
Check out our latest analysis for PWO
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PWO paid out a comfortable 33% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit PWO paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see PWO's earnings per share have risen 20% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the PWO dividends are largely the same as they were 10 years ago.
Final Takeaway
From a dividend perspective, should investors buy or avoid PWO? It's great that PWO is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. PWO looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in PWO for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for PWO that you should be aware of before investing in their 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.
