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Turbon AG (FRA:TUR) stock is about to trade ex-dividend in 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 Turbon's shares before the 26th of August in order to be eligible for the dividend, which will be paid on the 28th of August.
The company's next dividend payment will be €0.20 per share. Last year, in total, the company distributed €0.20 to shareholders. Calculating the last year's worth of payments shows that Turbon has a trailing yield of 5.6% on the current share price of €3.54. 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 Turbon has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Turbon
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. Turbon reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Turbon didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.
Click here to see how much of its profit Turbon 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. Turbon was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Turbon's dividend payments per share have declined at 10% per year on average over the past 10 years, which is uninspiring.