We Wouldn't Be Too Quick To Buy Ecora Resources PLC (LON:ECOR) Before It Goes Ex-Dividend
Ecora Resources PLC (LON:ECOR) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Ecora Resources' shares before the 26th of June in order to receive the dividend, which the company will pay on the 25th of July.
The company's next dividend payment will be US$0.0111 per share, on the back of last year when the company paid a total of US$0.082 to shareholders. Based on the last year's worth of payments, Ecora Resources has a trailing yield of 2.5% on the current stock price of UK£0.662. 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 Ecora Resources can afford its dividend, and if the dividend could grow.
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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ecora Resources paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Ecora Resources didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Dividends consumed 51% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
See our latest analysis for Ecora Resources
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Ecora Resources was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ecora Resources has seen its dividend decline 17% per annum on average over the past 10 years, which is not great to see.
Remember, you can always get a snapshot of Ecora Resources's financial health, by checking our visualisation of its financial health, here.
Is Ecora Resources worth buying for its dividend? It's hard to get used to Ecora Resources paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Ecora Resources is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Although, if you're still interested in Ecora Resources and want to know more, you'll find it very useful to know what risks this stock faces. Case in point: We've spotted 1 warning sign for Ecora Resources you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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