Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Van Elle Holdings plc (LON:VANL) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 5th of September, you won't be eligible to receive this dividend, when it is paid on the 27th of September.
Van Elle Holdings's next dividend payment will be UK£0.01 per share. Last year, in total, the company distributed UK£0.02 to shareholders. Based on the last year's worth of payments, Van Elle Holdings has a trailing yield of 4.8% on the current stock price of £0.42. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Van Elle Holdings paid out a comfortable 50% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (51%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Van Elle Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Van Elle Holdings's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 47% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Van Elle Holdings has delivered 5.6% dividend growth per year on average over the past 3 years.
To Sum It Up
Is Van Elle Holdings an attractive dividend stock, or better left on the shelf? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Wondering what the future holds for Van Elle Holdings? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.