Yahoo Finance We Wouldn't Be Too Quick To Buy Zug Estates Holding AG (VTX:ZUGN) Before It Goes Ex-Dividend
Zug Estates Holding AG (VTX:ZUGN) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Thus, you can purchase Zug Estates Holding's shares before the 11th of April in order to receive the dividend, which the company will pay on the 15th of April.
The company's next dividend payment will be CHF044.00 per share, on the back of last year when the company paid a total of CHF44.00 to shareholders. Calculating the last year's worth of payments shows that Zug Estates Holding has a trailing yield of 2.4% on the current share price of CHF01850.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Zug Estates Holding
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. Zug Estates Holding paid out 93% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.
It's good to see that while Zug Estates Holding's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.
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. Readers will understand then, why we're concerned to see Zug Estates Holding's earnings per share have dropped 9.1% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Zug Estates Holding has increased its dividend at approximately 11% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Zug Estates Holding is already paying out 93% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
Final Takeaway
Has Zug Estates Holding got what it takes to maintain its dividend payments? Earnings per share have been in decline, which is not encouraging. What's more, Zug Estates Holding is paying out a majority of its earnings and over half its free cash flow. It's hard to say if the business has the financial resources and time to turn things around without cutting the dividend. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
Although, if you're still interested in Zug Estates Holding and want to know more, you'll find it very useful to know what risks this stock faces. For instance, we've identified 4 warning signs for Zug Estates Holding (1 can't be ignored) you should be aware of.
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.
