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Aurubis AG (ETR:NDA) stock is about to trade ex-dividend in four days. The ex-dividend date is two business days before a company's record date in most cases, 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. In other words, investors can purchase Aurubis' shares before the 4th of April in order to be eligible for the dividend, which will be paid on the 8th of April.
The company's upcoming dividend is €1.50 a share, following on from the last 12 months, when the company distributed a total of €1.50 per share to shareholders. Looking at the last 12 months of distributions, Aurubis has a trailing yield of approximately 1.7% on its current stock price of €88.75. 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 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. Aurubis paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (75%) of its free cash flow in the past year, which is within an average range for most companies.
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 Aurubis
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Aurubis's earnings have been skyrocketing, up 27% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Aurubis has delivered 4.1% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Aurubis is keeping back more of its profits to grow the business.