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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 CeoTronics AG (FRA:CEK) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, 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. Accordingly, CeoTronics investors that purchase the stock on or after the 11th of November will not receive the dividend, which will be paid on the 13th of November.
The company's next dividend payment will be €0.15 per share, on the back of last year when the company paid a total of €0.15 to shareholders. Last year's total dividend payments show that CeoTronics has a trailing yield of 2.8% on the current share price of €5.40. If you buy this business for its dividend, you should have an idea of whether CeoTronics's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for CeoTronics
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. CeoTronics paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
Click here to see how much of its profit CeoTronics 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see CeoTronics earnings per share are up 9.6% per annum over the last five years.
We'd also point out that CeoTronics issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.