Just Three Days Till Piraeus Port Authority S.A. (ATH:PPA) Will Be Trading Ex-Dividend
It looks like Piraeus Port Authority S.A. (ATH:PPA) is about to go ex-dividend in the next three days. The ex-dividend date is commonly two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Piraeus Port Authority's shares before the 3rd of August to receive the dividend, which will be paid on the 7th of August.
The company's upcoming dividend is €1.896 a share, following on from the last 12 months, when the company distributed a total of €1.90 per share to shareholders. Last year's total dividend payments show that Piraeus Port Authority has a trailing yield of 4.3% on the current share price of €44.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Piraeus Port Authority paid out 55% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the last year, it paid out dividends equivalent to 376% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since Piraeus Port Authority is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
Piraeus Port Authority does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
Piraeus Port Authority paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Piraeus Port Authority's ability to maintain its dividend.
Check out our latest analysis for Piraeus Port Authority
Click here to see how much of its profit Piraeus Port Authority paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Piraeus Port Authority has grown its earnings rapidly, up 27% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Piraeus Port Authority has delivered 6.7% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Piraeus Port Authority an attractive dividend stock, or better left on the shelf? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Piraeus Port Authority paid out a much higher percentage of its free cash flow, which makes us uncomfortable. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Piraeus Port Authority's dividend merits.
So if you want to do more digging on Piraeus Port Authority, you'll find it worthwhile knowing the risks that this stock faces. Be aware that Piraeus Port Authority is showing 3 warning signs in our investment analysis, and 2 of those don't sit too well with us...
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.