Read This Before Considering Enter Air S.A. (WSE:ENT) For Its Upcoming zł2.50 Dividend
Enter Air S.A. (WSE:ENT) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Enter Air's shares on or after the 13th of August will not receive the dividend, which will be paid on the 21st of August.
The company's next dividend payment will be zł2.50 per share. Last year, in total, the company distributed zł2.50 to shareholders. Based on the last year's worth of payments, Enter Air has a trailing yield of 4.5% on the current stock price of zł55.80. If you buy this business for its dividend, you should have an idea of whether Enter Air's dividend is reliable and sustainable. So we need to investigate whether Enter Air can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Enter Air distributed an unsustainably high 119% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 12% of its free cash flow in the last year.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Enter Air fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Check out our latest analysis for Enter Air
Click here to see how much of its profit Enter Air 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Enter Air has grown its earnings rapidly, up 50% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Enter Air has delivered 29% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Enter Air an attractive dividend stock, or better left on the shelf? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Enter Air is paying out so much of its profit. All things considered, we are not particularly enthused about Enter Air from a dividend perspective.
On that note, you'll want to research what risks Enter Air is facing. For example - Enter Air has 3 warning signs we think 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.