Income investors should know that Logistri Fastighets AB (publ) (NGM:LOGIST) will soon go ex-dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Logistri Fastighets AB (publ) (NGM:LOGIST) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company’s record date. This is the date on which the company determines which shareholders are entitled to dividends. It is important to be aware of the ex-dividend date because any transaction on the stock must be settled on or before the record date. Therefore, if you purchase Logistri Fastighets shares on or after April 26th, you will not be eligible to receive the dividend, when it is paid on May 3rd.

The company’s upcoming dividend is kr01.30 per share, following on from the last twelve months when the company distributed a total of kr5.20 per share to shareholders. Based on the last year’s worth of payments, Logistri Fastighets has a rolling yield of 3.9% on the current share price of kr0135.00. We like to see companies paying a dividend, but it’s also important to make sure that laying the golden eggs won’t kill our golden goose! So we need to check whether dividend payments are covered and whether profits are growing.

See our latest analysis for Logistri Fastighets

Dividends are typically paid out of company income, so if a company pays out more than it earned then its dividend is usually at higher risk of being cut. That’s why it’s good to see Logistri Fastighets paying out a modest 40% of its revenue. A useful secondary check can be to assess whether Logistri Fastighets generated enough free cash flow to pay its dividend. Last year it paid out more than half (51%) of its free cash flow, which is within the average range for most companies.

It’s encouraging to see that the dividend is covered by both profits and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see how much of its profit Logistri Fastighets paid out over the last 12 months.

Have profits and dividends grown?

Companies with declining profits are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is cut, you can expect a stock to be heavily sold off at the same time. Readers will then understand why we are concerned that Logistri Fastighets’ earnings per share have fallen 8.3% per year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

We would also like to point out that Logistri Fastighets has issued a significant number of new shares over the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek story of Sisyphus: he continually pushes a boulder up a mountain.

Many investors will judge a company’s dividend performance by evaluating how much the dividend payments have changed over time. Logistri Fastighets has seen its dividend fall by an average of 8.7% per year over the past six years, which isn’t great to see. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged by the fact that management cut the dividend rather than risk overpromising the company in a risky attempt to maintain returns for shareholders.

Summing it up

From a dividend perspective, should investors buy or avoid Logistri Fastighets? Earnings per share are down significantly, although Logistri Fastighets at least paid out less than half of its profit and free cash flow over the past year, leaving some margin of safety. It might be worth exploring whether the company is reinvesting in growth projects that could boost earnings and dividends in the future, but for now we’re not too optimistic about its dividend prospects.

That said, if dividends aren’t your main concern with Logistri Fastighets, you should be aware of the other risks facing this company. Please note that Logistri Fastighets is visible 6 warning signs in our investment analysisand two of them should not be ignored…

In general, we don’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 from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.