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Readers hoping to buy VAT Group AG (VTX:VACN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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 VAT Group's shares before the 19th of May in order to be eligible for the dividend, which will be paid on the 23rd of May.
The company's next dividend payment will be CHF6.25 per share, on the back of last year when the company paid a total of CHF6.25 to shareholders. Last year's total dividend payments show that VAT Group has a trailing yield of 1.9% on the current share price of CHF320.6. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether VAT Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for VAT Group
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. VAT Group is paying out an acceptable 61% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether VAT Group generated enough free cash flow to afford its dividend. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.
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.
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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see VAT Group has grown its earnings rapidly, up 22% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, VAT Group could have strong prospects for future increases to the dividend.