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Readers hoping to buy Jenoptik AG (ETR:JEN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Jenoptik investors that purchase the stock on or after the 19th of June will not receive the dividend, which will be paid on the 21st of June.
The company's upcoming dividend is €0.35 a share, following on from the last 12 months, when the company distributed a total of €0.35 per share to shareholders. Looking at the last 12 months of distributions, Jenoptik has a trailing yield of approximately 1.3% on its current stock price of €27.48. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Jenoptik
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. Jenoptik paid out a comfortable 26% of its profit last year. A useful secondary check can be to evaluate whether Jenoptik generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 25% of its cash flow last year.
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 falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Jenoptik's earnings per share have been shrinking at 2.7% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Jenoptik has lifted its dividend by approximately 5.8% a year on average.
To Sum It Up
Is Jenoptik worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Jenoptik looks okay on this analysis, although it doesn't appear a stand-out opportunity.