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Why It Might Not Make Sense To Buy EJF Investments Limited (LON:EJFI) For Its Upcoming Dividend

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EJF Investments Limited (LON:EJFI) stock is about to trade ex-dividend in 3 days. You can purchase shares before the 6th of May in order to receive the dividend, which the company will pay on the 28th of May.

EJF Investments's upcoming dividend is UK£0.027 a share, following on from the last 12 months, when the company distributed a total of UK£0.11 per share to shareholders. Based on the last year's worth of payments, EJF Investments stock has a trailing yield of around 8.4% on the current share price of £1.27. If you buy this business for its dividend, you should have an idea of whether EJF Investments's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for EJF Investments

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. EJF Investments reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see how much of its profit EJF Investments 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. EJF Investments was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last three years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, four years ago, EJF Investments has lifted its dividend by approximately 2.7% a year on average.

Get our latest analysis on EJF Investments's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid EJF Investments? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that being said, if you're still considering EJF Investments as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that EJF Investments is showing 3 warning signs in our investment analysis, and 2 of those are a bit unpleasant...

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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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