Cibus Nordic Real Estate AB (publ) (STO:CIBUS) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company’s books to be eligible for a dividend payment. 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. Accordingly, Cibus Nordic Real Estate investors that purchase the stock on or after the 26th of May will not receive the dividend, which will be paid on the 3rd of June.
The company’s next dividend payment will be €0.07 per share, on the back of last year when the company paid a total of €0.90 to shareholders. Based on the last year’s worth of payments, Cibus Nordic Real Estate stock has a trailing yield of around 6.3% on the current share price of kr0154.10. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We’d be concerned if earnings began to decline. 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. Dividends consumed 53% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organisations.
It’s positive to see that Cibus Nordic Real Estate’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Check out our latest analysis for Cibus Nordic Real Estate
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we’re not overly excited about Cibus Nordic Real Estate’s flat earnings over the past five years. It’s better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. A high payout ratio of 88% generally happens when a company can’t find better uses for the cash. Combined with slim earnings growth in the past few years, Cibus Nordic Real Estate could be signalling that its future growth prospects are thin.
Cibus Nordic Real Estate also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a boulder uphill.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, Cibus Nordic Real Estate has increased its dividend at approximately 1.5% a year on average.
To Sum It Up
Has Cibus Nordic Real Estate got what it takes to maintain its dividend payments? Cibus Nordic Real Estate has struggled to grow its earnings per share, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don’t appear unsustainable. Overall, it’s not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
However if you’re still interested in Cibus Nordic Real Estate as a potential investment, you should definitely consider some of the risks involved with Cibus Nordic Real Estate. Be aware that Cibus Nordic Real Estate is showing 2 warning signs in our investment analysis, and 1 of those is significant…
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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.