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Amadeus FiRe AG (ETR:AAD) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is two business days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Amadeus FiRe's shares before the 23rd of May in order to be eligible for the dividend, which will be paid on the 27th of May.
The company's next dividend payment will be €4.03 per share, on the back of last year when the company paid a total of €4.03 to shareholders. Based on the last year's worth of payments, Amadeus FiRe has a trailing yield of 5.0% on the current stock price of €80.00. If you buy this business for its dividend, you should have an idea of whether Amadeus FiRe's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 89% 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 worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether Amadeus FiRe generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (76%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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.
View our latest analysis for Amadeus FiRe
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Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Amadeus FiRe's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.