It might not be a good idea to buy Provide IT Sweden AB (publ) (NGM:PROVIT) for its next dividend
Provide IT Sweden AB (publ) (NGM:PROVIT) share is about to be traded ex-dividend in 3 days. Typically, the ex-dividend date is one banking day before the record date, which is the date a company determines which shareholders are eligible to receive dividends. The ex-dividend date is important because the settlement process takes two full business days. So if you miss that date, you would not appear on the company’s books on the reconciliation date. Thus, you can buy Provide IT Sweden’s shares before September 29 to receive the dividend that the company pays on October 5.
The company’s next dividend will be SEK 0.33 per share, on the back of last year when the company paid out a total of SEK 0.34 to shareholders. Last year’s total dividends show that Provide IT Sweden has a trailing yield of 5.3% at the current share price of SEK 6.4. We love to see companies pay dividends, but it’s also important to be sure that laying the golden eggs won’t kill our golden goose! Therefore, we should always check whether the dividend seems sustainable and whether the company is growing.
See our latest analysis for Provide IT Sweden
If a company pays out more in dividends than it earned, the dividend can become unsustainable – hardly an ideal situation. Provide IT Sweden distributed an unsustainably high 146% of its profit as dividends to shareholders last year. Without a more sustainable payment behavior, the dividend looks uncertain.
Click here to see how much of the profit Provide IT Sweden paid out in the last 12 months.
Have profits and dividends increased?
Companies with declining earnings are more risky for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Provide IT Sweden’s earnings per share have fallen by approximately 9.6% per year over the past five years. As earnings per share decline, so does the maximum amount of dividends that can be paid.
The main way most investors assess a company’s dividend prospects is by checking the historical rate of dividend growth. Provide IT Sweden has seen its dividend fall by 11% per year on average over the past five years, which isn’t great to see. It’s never nice to see profits and dividends fall, but at least management has cut the dividend rather than potentially risking the health of the company in an attempt to maintain it.
Last takeaway
Should investors buy Provide IT Sweden for the upcoming dividend? Not only is the profit per share reduced, but Provide IT Sweden pays out a worryingly high percentage of its profit as a dividend. It’s not that we hate the business, but we feel that these characteristics are not desirable for investors looking for a reliable dividend stock to own for the long term. This isn’t an overtly appealing combination of traits, and we’re just not that interested in this company’s dividend.
So if you are still interested in Provide IT Sweden despite its poor dividend qualities, you should be well informed about some of the risks this stock faces. Be aware that Provide IT Sweden is showing off 5 warning signs in our investment analysisand 2 of them should not be ignored…
In general, we wouldn’t recommend just buying the first dividend stock you see. Here is 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 by 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 shares and does not take into account your goals or your financial situation. We strive to provide you with long-term focused analysis driven by fundamental data. Note that our analysis may not take into account recent price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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