It looks like Baader Bank Aktiengesellschaft (ETR:BWB) is about to go ex-dividend in the next two 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Baader Bank's shares before the 7th of July in order to be eligible for the dividend, which will be paid on the 11th of July.
The company's upcoming dividend is €0.05 a share, following on from the last 12 months, when the company distributed a total of €0.05 per share to shareholders. Based on the last year's worth of payments, Baader Bank has a trailing yield of 1.2% on the current stock price of €4.05. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Baader Bank
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. Baader Bank paid out a comfortable 28% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Baader Bank paid out over the last 12 months.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Baader Bank's earnings have been skyrocketing, up 29% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Baader Bank's dividend payments are broadly unchanged compared to where they were 10 years ago.
To Sum It Up
Has Baader Bank got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Baader Bank appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.