Be Sure To Check Out DEFAMA Deutsche Fachmarkt AG (ETR:DEF) Before It Goes Ex-Dividend
DEFAMA Deutsche Fachmarkt AG (ETR:DEF) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase DEFAMA Deutsche Fachmarkt's shares on or after the 14th of July will not receive the dividend, which will be paid on the 16th of July.
The company's next dividend payment will be €0.63 per share. Last year, in total, the company distributed €0.63 to shareholders. Based on the last year's worth of payments, DEFAMA Deutsche Fachmarkt has a trailing yield of 2.7% on the current stock price of €23.40. If you buy this business for its dividend, you should have an idea of whether DEFAMA Deutsche Fachmarkt's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. DEFAMA Deutsche Fachmarkt is paying out an acceptable 54% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
See our latest analysis for DEFAMA Deutsche Fachmarkt
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, DEFAMA Deutsche Fachmarkt's earnings per share have been growing at 16% a year for the past five years. DEFAMA Deutsche Fachmarkt has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DEFAMA Deutsche Fachmarkt has delivered an average of 8.0% per year annual increase in its dividend, based on the past eight years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is DEFAMA Deutsche Fachmarkt an attractive dividend stock, or better left on the shelf? DEFAMA Deutsche Fachmarkt's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in DEFAMA Deutsche Fachmarkt for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with DEFAMA Deutsche Fachmarkt (including 2 which are a bit unpleasant).
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.