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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 Knorr-Bremse AG (ETR:KBX) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. This means that investors who purchase Knorr-Bremse's shares on or after the 2nd of May will not receive the dividend, which will be paid on the 6th of May.
The company's next dividend payment will be €1.75 per share, and in the last 12 months, the company paid a total of €1.75 per share. Based on the last year's worth of payments, Knorr-Bremse has a trailing yield of 2.1% on the current stock price of €84.55. If you buy this business for its dividend, you should have an idea of whether Knorr-Bremse's dividend is reliable and sustainable. So we need to investigate whether Knorr-Bremse can afford its dividend, and if the dividend could grow.
Our free stock report includes 1 warning sign investors should be aware of before investing in Knorr-Bremse. Read for free now.
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. Knorr-Bremse is paying out an acceptable 63% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 38% of the free cash flow it generated, which is a comfortable payout ratio.
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 Knorr-Bremse
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Knorr-Bremse's earnings per share have dropped 5.4% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.