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It looks like B&M European Value Retail S.A. (LON:BME) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 19th of November to receive the dividend, which will be paid on the 4th of December.
The upcoming dividend for B&M European Value Retail will put a total of UK£0.29 per share in shareholders' pockets, up from last year's total dividends of UK£0.081. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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.
Check out our latest analysis for B&M European Value Retail
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. B&M European Value Retail paid out a comfortable 33% of its profit last year. 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. The good news is it paid out just 12% of its free cash flow in the last year.
It's positive to see that B&M European Value Retail'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 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 B&M European Value Retail has grown its earnings rapidly, up 50% a year for the past five years. B&M European Value Retail is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. B&M European Value Retail has delivered 28% dividend growth per year on average over the past six years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.