It looks like Bank of Greece (ATH:TELL) is about to go ex-dividend in the next 2 days. You can purchase shares before the 26th of March in order to receive the dividend, which the company will pay on the 2nd of April.
Bank of Greece's next dividend payment will be €0.67 per share, on the back of last year when the company paid a total of €0.67 to shareholders. Based on the last year's worth of payments, Bank of Greece stock has a trailing yield of around 5.1% on the current share price of €13.2. 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 investigate whether Bank of Greece can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bank of Greece paid out just 2.0% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. To our modest chagrin, Bank of Greece earnings per share have been effectively flat over the past year. The best dividend stocks all grow their earnings per share over the long run, but it is hard to draw strong conclusions from any one year period.
One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bank of Greece has seen its dividend decline 12% per annum on average over the past ten years, which is not great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid Bank of Greece? Earnings per share have been flat in recent years, although Bank of Greece reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Bank of Greece looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Bank of Greece for the dividends alone, you should always be mindful of the risks involved. For example, Bank of Greece has 3 warning signs (and 1 which is a bit concerning) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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