Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Ultimate Games SA (WSE:ULG) is set to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement which does not appear on the record date. So, you can buy shares of Ultimate Games before June 14 in order to receive the dividend, which the company will pay on June 27.
The company’s next dividend payment will be 1.50 zł per share, and over the past 12 months the company has paid a total of 1.50 zł per share. Looking at the last 12 months of distributions, Ultimate Games has a yield of around 7.1% on its current price of 21.1 PLN. If you’re buying this company for its dividend, you should have some idea of the reliability and sustainability of Ultimate Games’ dividend. We therefore need to check whether dividend payments are covered and whether profits are increasing.
See our latest review for Ultimate Games
Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. Ultimate Games has paid out 135% of profits over the past year, which we believe is generally not sustainable unless there are mitigating characteristics such as unusually high cash flow or a large cash balance.
Click here to see how much profit Ultimate Games has paid out over the past 12 months.
Have earnings and dividends increased?
Companies with strong growth prospects are generally the best dividend payers because it is easier to increase dividends when earnings per share improve. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. It’s encouraging to see that Ultimate Games has grown its revenue rapidly, growing by 40% per year over the past five years.
Ultimate Games has also issued more than 5% of its market capitalization in new shares over the past year, which we believe may hurt its long-term dividend outlook. Trying to increase the dividend while issuing large amounts of new stock reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a rock upwards.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past three years, Ultimate Games has increased its dividend by about 62% per year on average. It’s exciting to see that earnings and dividends per share have grown rapidly over the past few years.
Should Investors Buy Ultimate Games for the Next Dividend? We’re not thrilled that Ultimate Games’ dividend hasn’t been well covered by earnings over the past year, although it’s great to see earnings growing. In summary, Ultimate Games looks promising as a dividend stock, and we suggest you take a closer look.
In light of this, although Ultimate Games has an attractive dividend, it is worth knowing the risks involved in this stock. Our analysis shows 3 warning signs for Ultimate Games which we strongly recommend that you consult before investing in the company.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.