Here's Why We're Wary Of Buying Corem Property Group's (STO:CORE A) For Its Upcoming Dividend
Readers hoping to buy Corem Property Group AB (publ) (STO:CORE A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Corem Property Group's shares before the 29th of September in order to receive the dividend, which the company will pay on the 5th of October.
The company's next dividend payment will be kr00.02 per share, on the back of last year when the company paid a total of kr0.10 to shareholders. Last year's total dividend payments show that Corem Property Group has a trailing yield of 3.0% on the current share price of kr03.32. If you buy this business for its dividend, you should have an idea of whether Corem Property Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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. Corem Property Group 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. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the last year, it paid out dividends equivalent to 211% of what it generated in free cash flow, a disturbingly high percentage. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
See our latest analysis for Corem Property Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Corem Property Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Corem Property Group's dividend payments per share have declined at 9.5% 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.
Get our latest analysis on Corem Property Group's balance sheet health here.
Final Takeaway
Is Corem Property Group worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Corem Property Group.
Although, if you're still interested in Corem Property Group and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 2 warning signs with Corem Property Group and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.