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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 B&M European Value Retail S.A. (LON:BME) is about to go ex-dividend in just 3 days. Typically, the ex-dividend date is one business day 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. In other words, investors can purchase B&M European Value Retail's shares before the 18th of January in order to be eligible for the dividend, which will be paid on the 9th of February.
The company's upcoming dividend is UK£0.20 a share, following on from the last 12 months, when the company distributed a total of UK£0.35 per share to shareholders. Looking at the last 12 months of distributions, B&M European Value Retail has a trailing yield of approximately 6.1% on its current stock price of £5.672. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether B&M European Value Retail has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for B&M European Value Retail
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. Fortunately B&M European Value Retail's payout ratio is modest, at just 41% of profit. 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. Luckily it paid out just 23% of its free 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.
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. Fortunately for readers, B&M European Value Retail's earnings per share have been growing at 14% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.