Yahoo Finance Don't Race Out To Buy Energean plc (LON:ENOG) Just Because It's Going Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Energean plc (LON:ENOG) is about to go ex-dividend in just three days. The ex-dividend date is one business day 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 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. In other words, investors can purchase Energean's shares before the 9th of March in order to be eligible for the dividend, which will be paid on the 30th of March.
The company's next dividend payment will be US$0.30 per share. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Energean
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Energean paid out 92% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Energean paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Energean's earnings per share have plummeted approximately 51% a year over the previous five years.
This is Energean's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
Final Takeaway
Is Energean worth buying for its dividend? Not only are earnings per share shrinking, but Energean is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Energean. For instance, we've identified 3 warning signs for Energean (2 shouldn't be ignored) you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's 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 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.
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