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Readers hoping to buy Bilfinger SE (ETR:GBF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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 Bilfinger's shares before the 16th of May in order to receive the dividend, which the company will pay on the 21st of May.
The company's next dividend payment will be €1.80 per share, on the back of last year when the company paid a total of €1.80 to shareholders. Calculating the last year's worth of payments shows that Bilfinger has a trailing yield of 3.9% on the current share price of €45.70. 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.
Check out our latest analysis for Bilfinger
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Bilfinger's payout ratio is modest, at just 38% of profit. A useful secondary check can be to evaluate whether Bilfinger generated enough free cash flow to afford its dividend. It paid out more than half (56%) 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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Bilfinger has grown its earnings rapidly, up 37% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bilfinger's dividend payments per share have declined at 5.0% per year on average over the past 10 years, which is uninspiring. Bilfinger is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.