【is decaf diuretic】Don't Buy WirTek A/S (CPH:WIRTEK) For Its Next Dividend Without Doing These Checks

Some investors rely on dividends for growing their wealth,is decaf diuretic and if you're one of those dividend sleuths, you might be intrigued to know that

WirTek A/S

(

CPH:WIRTEK

) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 6th of April will not receive this dividend, which will be paid on the 8th of April.

The upcoming dividend for WirTek is ø0.16 per share, increased from last year's total dividends per share of ø0.11. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether WirTek can afford its dividend, and if the dividend could grow.

Check out our latest analysis for WirTek

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. WirTek distributed an unsustainably high 118% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.

Click

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

CPSE:WIRTEK Historical Dividend Yield April 1st 2020

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about WirTek's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last six years, WirTek has lifted its dividend by approximately 3.4% a year on average.

Final Takeaway

Has WirTek got what it takes to maintain its dividend payments? Earnings per share have been effectively flat, which is a bit of a concern given the company is paying out 118% of its profit as dividends, which we feel is uncomfortably high. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

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 WirTek. Every company has risks, and we've spotted

6 warning signs for WirTek

(of which 1 is concerning!) you should know about.

Story continues

If you're in the market for dividend stocks, we recommend

checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at

[email protected]

. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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