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 Bertrandt Aktiengesellschaft (ETR:BDT) is about to go ex-dividend in just three 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. Thus, you can purchase Bertrandt's shares before the 23rd of February in order to receive the dividend, which the company will pay on the 27th of February.
The company's next dividend payment will be €0.85 per share, on the back of last year when the company paid a total of €0.85 to shareholders. Last year's total dividend payments show that Bertrandt has a trailing yield of 1.7% on the current share price of €48.65. If you buy this business for its dividend, you should have an idea of whether Bertrandt's dividend is reliable and sustainable. So we need to investigate whether Bertrandt can afford its dividend, and if the dividend could grow.
See our latest analysis for Bertrandt
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Bertrandt paying out a modest 41% of its earnings. A useful secondary check can be to evaluate whether Bertrandt generated enough free cash flow to afford its dividend. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Bertrandt's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Bertrandt's 12% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bertrandt has seen its dividend decline 8.2% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.