Multitude SE (ETR:FRU) stock is about to trade ex-dividend in three days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Multitude's shares on or after the 26th of April, you won't be eligible to receive the dividend, when it is paid on the 7th of May.

The company's upcoming dividend is €0.19 a share, following on from the last 12 months, when the company distributed a total of €0.19 per share to shareholders. Calculating the last year's worth of payments shows that Multitude has a trailing yield of 3.7% on the current share price of €5.10. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Multitude has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Multitude

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. That's why it's good to see Multitude paying out a modest 37% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Multitude's 11% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Multitude has lifted its dividend by approximately 8.4% a year on average.

The Bottom Line

Is Multitude worth buying for its dividend? Multitude's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.