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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Dinkelacker AG (BST:DWB) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Dinkelacker's shares before the 11th of April in order to receive the dividend, which the company will pay on the 15th of April.
The company's next dividend payment will be €32.00 per share, on the back of last year when the company paid a total of €32.00 to shareholders. Last year's total dividend payments show that Dinkelacker has a trailing yield of 3.0% on the current share price of €1070.00. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dinkelacker paid out 61% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Dinkelacker generated enough free cash flow to afford its dividend. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Dinkelacker'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.
View our latest analysis for Dinkelacker
Click here to see how much of its profit Dinkelacker paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Dinkelacker's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.