Why It Might Not Make Sense To Buy Thessaloniki Water Supply & Sewerage Co S.A. (ATH:EYAPS) For Its Upcoming Dividend
Thessaloniki Water Supply & Sewerage Co S.A. (ATH:EYAPS) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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 Thessaloniki Water Supply & Sewerage Co's shares before the 25th of August in order to receive the dividend, which the company will pay on the 1st of September.
The company's next dividend payment will be €0.0746 per share. Last year, in total, the company distributed €0.075 to shareholders. Based on the last year's worth of payments, Thessaloniki Water Supply & Sewerage Co stock has a trailing yield of around 1.6% on the current share price of €4.81. If you buy this business for its dividend, you should have an idea of whether Thessaloniki Water Supply & Sewerage Co's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Fortunately Thessaloniki Water Supply & Sewerage Co's payout ratio is modest, at just 35% of profit. A useful secondary check can be to evaluate whether Thessaloniki Water Supply & Sewerage Co generated enough free cash flow to afford its dividend.
View our latest analysis for Thessaloniki Water Supply & Sewerage Co
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Thessaloniki Water Supply & Sewerage Co's 8.3% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Thessaloniki Water Supply & Sewerage Co's dividend payments per share have declined at 11% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
To Sum It Up
Is Thessaloniki Water Supply & Sewerage Co worth buying for its dividend? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though Thessaloniki Water Supply & Sewerage Co is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
Keen to explore more data on Thessaloniki Water Supply & Sewerage Co's financial performance? Check out our visualisation of its historical revenue and earnings growth.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.