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 DEFAMA Deutsche Fachmarkt AG (ETR:DEF) is about to go ex-dividend in just 4 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 DEFAMA Deutsche Fachmarkt's shares before the 24th of July in order to be eligible for the dividend, which will be paid on the 26th of July.
The upcoming dividend for DEFAMA Deutsche Fachmarkt is €0.54 per share, increased from last year's total dividends per share of €0.51. If you buy this business for its dividend, you should have an idea of whether DEFAMA Deutsche Fachmarkt's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for DEFAMA Deutsche Fachmarkt
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. That's why it's good to see DEFAMA Deutsche Fachmarkt paying out a modest 45% of its earnings.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, it's good to see earnings have grown 16% on last year.
One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, DEFAMA Deutsche Fachmarkt has lifted its dividend by approximately 9.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is DEFAMA Deutsche Fachmarkt an attractive dividend stock, or better left on the shelf? We love that DEFAMA Deutsche Fachmarkt is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.