The share of the public limited company Gazprom Neft (MCX: SIBN) becomes ex-dividend in just four days

Gazprom Neft public joint stock company The stock (MCX: SIBN) is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not appear on the books of the company on the date of registration. In other words, investors can buy Gazprom Neft shares before June 24 in order to be eligible for the dividend, which will be paid on January 1.

The company’s next dividend payment will be 15.00 per share. Last year, in total, the company distributed 15.00 to shareholders. Based on the value of last year’s payouts, the Gazprom Neft share has a rolling yield of around 3.6% on the current share price of 420.8 RUB. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs is not going to kill our goose that lays the golden eggs! So we need to determine whether Gazprom Neft can afford its dividend and whether the dividend could increase.

See our latest analysis for Gazprom Neft

Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, the dividend could be unsustainable. This is why it is good to see Gazprom Neft donating a modest 33% of its profits. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. In the past year, it has paid out 124% of its free cash flow as dividends, which is uncomfortably high. It’s difficult to consistently pay more money than you generate without borrowing or using company cash, so we wonder how the company justifies this level of payment.

Gazprom Neft paid less dividends than it made profits, but unfortunately it did not generate enough cash to cover the dividend. If this were to happen again, it would pose a risk to Gazprom Neft’s ability to maintain its dividend.

Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.

MISX: SIBN Historical Dividend June 19, 2021

Have profits and dividends increased?

Companies with steadily increasing earnings per share usually make the best dividend-paying stocks because they generally find it easier to increase dividends per share. If profits fall enough, the company could be forced to cut its dividend. Luckily for readers, Gazprom Neft’s earnings per share have grown by 14% per year over the past five years. Profits have grown at a decent pace, but we’re concerned that dividend payments have consumed most of the company’s cash flow over the past year.

Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. Gazprom Neft has provided an average annual increase of 13% per annum in its dividend, based on dividend payments over 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.

To summarize

Should investors buy Gazprom Neft for the next dividend? We are happy to see that the company has improved its earnings per share while contributing a small percentage of its revenue. However, it’s not great to see him paying what we consider to be an uncomfortably high percentage of his cash flow. Although there are good things to do, we are a little ambivalent and it would take more to convince us of the merits of the Gazprom Neft dividend.

On that note, you’ll want to research the risks Gazprom Neft faces. Our analysis shows 1 warning sign for Gazprom Neft and you should be aware of this before you buy any stocks.

A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St does not have any position in the mentioned stocks.
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