Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Port Authority of Piraeus SA (ATH: PPA) is set to be ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. As a result, investors in the Piraeus Port Authority who purchase the shares on or after July 26 will not receive the dividend, which will be paid on July 30.
The company’s future dividend is € 0.40 per share, following the last 12 months, when the company has distributed a total of € 0.40 per share to shareholders. Based on the value of last year’s payouts, Piraeus Port Authority shares have a rolling yield of around 2.0% on the current share price of € 19.74. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
Check out our latest review for Piraeus Port Authority
Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, then the dividend could be unsustainable. Fortunately, Piraeus Port Authority’s payout ratio is modest, at just 38% of profits. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. Dividends consumed 62% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organizations.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. It is encouraging to see that the Piraeus Port Authority has grown its revenue rapidly, increasing by 26% per year over the past five years.
Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. The Piraeus Port Authority has provided an average annual increase of 35% per annum in its dividend, based on the dividend payments of the past 10 years. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.
The bottom line
Is the Piraeus Port Authority an attractive dividend-paying stock, or rather left on the shelf? Earnings per share have been growing at a good pace lately and over the past year the Piraeus Port Authority has paid out less than half of its profits and just over half of its free cash flow. There is a lot to like about the Piraeus Port Authority, and we would prioritize taking a closer look.
On that note, you’ll want to research the risks that the Piraeus Port Authority faces. In terms of investment risks, we have identified 1 warning sign with the Piraeus Port Authority and understanding them should be part of your investment process.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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