Should Income Investors Look At Desarrollos Especiales de Sistemas de Anclaje, S.A. (BME:DESA) Before Its Ex-Dividend?
It looks like Desarrollos Especiales de Sistemas de Anclaje, S.A. (BME:DESA) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Desarrollos Especiales de Sistemas de Anclaje investors that purchase the stock on or after the 27th of July will not receive the dividend, which will be paid on the 29th of July.
The company's next dividend payment will be €0.2275416 per share, and in the last 12 months, the company paid a total of €1.12 per share. Calculating the last year's worth of payments shows that Desarrollos Especiales de Sistemas de Anclaje has a trailing yield of 4.6% on the current share price of €24.40. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Desarrollos Especiales de Sistemas de Anclaje can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Desarrollos Especiales de Sistemas de Anclaje paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 2,848% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Desarrollos Especiales de Sistemas de Anclaje intends to continue funding this dividend, or if it could be forced to cut the payment.
Desarrollos Especiales de Sistemas de Anclaje paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Desarrollos Especiales de Sistemas de Anclaje's ability to maintain its dividend.
View our latest analysis for Desarrollos Especiales de Sistemas de Anclaje
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Desarrollos Especiales de Sistemas de Anclaje has grown its earnings rapidly, up 35% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Desarrollos Especiales de Sistemas de Anclaje has lifted its dividend by approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
From a dividend perspective, should investors buy or avoid Desarrollos Especiales de Sistemas de Anclaje? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 2,848% of its cashflow, which is uncomfortably high. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
If you want to look further into Desarrollos Especiales de Sistemas de Anclaje, it's worth knowing the risks this business faces. To help with this, we've discovered 5 warning signs for Desarrollos Especiales de Sistemas de Anclaje (3 make us uncomfortable!) that you ought to be aware of before buying the shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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.