Yahoo Finance Why It Might Not Make Sense To Buy adesso SE (ETR:ADN1) For Its Upcoming Dividend
It looks like adesso SE (ETR:ADN1) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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 adesso's shares before the 5th of June in order to receive the dividend, which the company will pay on the 7th of June.
The company's next dividend payment will be €0.70 per share, and in the last 12 months, the company paid a total of €0.70 per share. Looking at the last 12 months of distributions, adesso has a trailing yield of approximately 0.7% on its current stock price of €98.40. If you buy this business for its dividend, you should have an idea of whether adesso's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for adesso
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. adesso paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If adesso didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Luckily it paid out just 8.3% of its free cash flow last year.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. adesso reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. adesso has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Get our latest analysis on adesso's balance sheet health here.
Final Takeaway
Is adesso worth buying for its dividend? It's hard to get used to adesso paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
So if you're still interested in adesso despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 1 warning sign for adesso and you should be aware of it before buying any 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.
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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.
