Investors In IPOPEMA Securities Spólka Akcyjna (WSE:IPE) Should Consider This, First
Dividend paying stocks like IPOPEMA Securities Spólka Akcyjna (WSE:IPE) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Unfortunately, it's common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.
A slim 2.9% yield is hard to get excited about, but the long payment history is respectable. At the right price, or with strong growth opportunities, IPOPEMA Securities Spólka Akcyjna could have potential. Before you buy any stock for its dividend however, you should always remember Warren Buffett's two rules: 1) Don't lose money, and 2) Remember rule #1. We'll run through some checks below to help with this.
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Payout ratios
Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. While IPOPEMA Securities Spólka Akcyjna pays a dividend, it reported a loss over the last year. When a loss-making financial company pays a dividend, the dividend is not being paid out of profit, which is a concern if the company can't return to operating profitably.
Consider getting our latest analysis on IPOPEMA Securities Spólka Akcyjna's financial position here.
Dividend Volatility
From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. For the purpose of this article, we only scrutinise the last decade of IPOPEMA Securities Spólka Akcyjna's dividend payments. The dividend has been cut by more than 20% on at least one occasion historically. During the past ten-year period, the first annual payment was zł0.34 in 2009, compared to zł0.04 last year. Dividend payments have fallen sharply, down 88% over that time.
Dividend Growth Potential
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's not great to see that IPOPEMA Securities Spólka Akcyjna's have fallen at approximately 54% over the past five years. Declining earnings per share over a number of years is not a great sign for the dividend investor. Without some improvement, this does not bode well for the long term value of a company's dividend.
Conclusion
When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. First, it's not great to see a dividend being paid despite the company being unprofitable over the last year. Earnings per share are down, and IPOPEMA Securities Spólka Akcyjna's dividend has been cut at least once in the past, which is disappointing. In short, we're not keen on IPOPEMA Securities Spólka Akcyjna from a dividend perspective. Businesses can change, but we've spotted a few too many concerns with this one to get comfortable.
See if management have their own wealth at stake, by checking insider shareholdings in IPOPEMA Securities Spólka Akcyjna stock.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.
