Yahoo Finance Don't Buy Koninklijke Vopak N.V. (AMS:VPK) For Its Next Dividend Without Doing These Checks
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Koninklijke Vopak N.V. (AMS:VPK) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Koninklijke Vopak's shares on or after the 28th of April, you won't be eligible to receive the dividend, when it is paid on the 5th of May.
The company's next dividend payment will be €1.30 per share, on the back of last year when the company paid a total of €1.30 to shareholders. Last year's total dividend payments show that Koninklijke Vopak has a trailing yield of 3.8% on the current share price of €34.3. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Koninklijke Vopak
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Koninklijke Vopak lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the 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. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Koninklijke Vopak reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Koninklijke Vopak has delivered 4.0% dividend growth per year on average over the past 10 years.
Get our latest analysis on Koninklijke Vopak's balance sheet health here.
To Sum It Up
From a dividend perspective, should investors buy or avoid Koninklijke Vopak? It's hard to get used to Koninklijke Vopak paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Koninklijke Vopak has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
So if you're still interested in Koninklijke Vopak despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 2 warning signs for Koninklijke Vopak that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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