Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that VH Global Sustainable Energy Opportunities plc (LON:GSEO) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase VH Global Sustainable Energy Opportunities' shares before the 5th of December in order to receive the dividend, which the company will pay on the 23rd of December.
The company's next dividend payment will be UK£0.0142 per share, on the back of last year when the company paid a total of UK£0.057 to shareholders. Based on the last year's worth of payments, VH Global Sustainable Energy Opportunities has a trailing yield of 8.3% on the current stock price of UK£0.686. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for VH Global Sustainable Energy Opportunities
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. VH Global Sustainable Energy Opportunities paid out 122% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see how much of its profit VH Global Sustainable Energy Opportunities paid out over the last 12 months.
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. From this viewpoint, it's unfortunate that earnings per share have declined 12% over the last year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, three years ago, VH Global Sustainable Energy Opportunities has lifted its dividend by approximately 31% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. VH Global Sustainable Energy Opportunities is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.