Do These 3 Checks Before Buying BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) For Its Upcoming Dividend
Simply Wall St
4 min read
It looks like BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- investors that purchase the stock on or after the 8th of June will not receive the dividend, which will be paid on the 12th of June.
The company's next dividend payment will be €0.28 per share, on the back of last year when the company paid a total of €0.28 to shareholders. Last year's total dividend payments show that BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has a trailing yield of 2.8% on the current share price of €10. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- generated enough free cash flow to afford its dividend. Fortunately, it paid out only 27% of its free cash flow in the past year.
It's good to see that while BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s earnings per share have fallen at approximately 16% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has seen its dividend decline 3.5% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
To Sum It Up
Should investors buy BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- for the upcoming dividend? It's never great to see earnings per share declining, especially when a company is paying out 111% of its profit as dividends, which we feel is uncomfortably high. Yet cashflow was much stronger, which makes us wonder if there are some large timing issues in BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s cash flows, or perhaps the company has written down some assets aggressively, reducing its income. It's not that we think BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Although, if you're still interested in BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 5 warning signs for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (2 are concerning!) that you ought to be aware of before buying the shares.
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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.
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